NEW YORK — Real estate brokerage Compass has attracted $808 million in funding and is valued at $1.8 billion, but many in the real estate industry wonder: What is it exactly that makes Compass different from other brokerages and therefore worth this kind of investment?
At Inman Connect New York this week, that question remained mostly unanswered. The firm’s chief revenue officer, Rob Lehman, in discussion with Brian Boero of 1000watt, touted Compass’s “agent-centric” approach laser-focused on how to create value for agents and help them grow their business.
“What does that mean specifically?” Boero asked.
“It’s saying, ‘What is it that agents want? What is it you can do to elevate and grow their business?'” Lehman responded.
The average Compass agent grows their business 24.8 percent in their first year at the company, according to Lehman. He attributed that growth to the technology the firm offers.
“One out of four people at Compass are purely dedicated to building technology products. The agent never has to go to third-party solutions” and its single, integrated end-to-end platform saves them hours, he said.
There’s also a cultural element, according to Lehman.
“You talk to Compass agents and there is a sense of them being re-invigorated, more excited about real estate than in the past,” he said.
Compass doesn’t recruit agents “that don’t play nicely in the sandbox,” he added. “Everyone has a reputation. We know who everyone is. Our focus is on agents that are reliable, that are collaborative.”
But how is Compass more “agent-centric” than, say, Keller Williams? And what exactly is included in the company’s tech platform, which apparently does not even yet include a customer relationship management tool?
As a private company, Compass does not have to answer such questions, though Boero tried to get Lehman to disclose specifics.
In November, Compass, already in 10 markets, revealed plans to expand into 10 new markets to grab 20 percent of the market share in the 20 largest U.S. cities by 2020.
“It’s an ambitious goal [but] your potential is capped by your ambition. We think we’re going to hit it because of the incredible network effect that we’ve built,” Lehman said.
“We have data that shows that agents at Compass are more likely to recommend Compass to a fellow agent that they are to recommend their Amazon subscription. That’s the level of loyalty.”
Thus far, Compass has mainly grown by recruiting top-producing agents and teams, luring them in with big signing bonuses. If the old adage that 20 percent of the agents do 80 percent of the business in the industry is true, that agent acquisition could put Compass well on its way toward its market share goals.
But will those agents stay once their initial contracts expire and those big checks have been cashed?
Thaddeus Wong, co-founder of Chicago-based brokerage @properties (and now a competitor to Compass) speculated that the relationships between Compass and its agents are “monetized” and that would make them more likely to leave if another firm offers them more at the end of their two-year contracts.
@properties has not lost any agents to Compass at this point, Wong told Boero, but some have met with Compass and they did find it “tough” to resist taking a bonus that would mean a nice infusion into their kids’ college funds.
“It’s interesting that they have a valuation now that’s greater than Redfin,” he said.
“They come in and they’ve got huge, kind-of, for lack of a better term, F-U money.”
Redfin, now a public company, has disclosed how it’s using technology to better the consumer experience. Wong wondered aloud, “What is the technology that [Compass is] offering?”
Later, Boero asked Lehman what Wong got wrong about Compass.
Lehman didn’t push back against anything Wong said and congratulated Wong on building a great company.
Boero noted that “everybody freaks out” when Compass enters a market. “What do you want those people to know other than ‘They should be freaked out because we’re kicking ass’?”
“That we’re coming from a place truly of humility. We want to learn about the agent experience,” Lehman said.
“Every single market that we’re going to go in … we’re going to compete through value.”
Lehman acknowledged that there are “misconceptions” in the real estate industry about Compass and that the company itself was at least partly to blame.
“I think we need to get better at [communicating] because we’ve not been telling our story as proactively as we could,” he said.