Movoto Real Estate, the operator of one of the most popular real estate sites and a fast-growing brokerage, has raised $8 million to build on what its CEO cast as a dramatic turnaround over the last two years.
The company lost around $30 million after being acquired by Recruit Holdings Company Ltd. in 2013 – the result of global overextension and a lack of focus, according to Movoto CEO Imtiyaz Haque. But the firm regained independence after a management buyout in January 2018, he said.
Movoto has since cut staff and overhead, become the fifth most-visited U.S. listing site according to SimilarWeb rankings and built an in-house brokerage with well over 200 agents, according to Haque. He added that a number of big industry players have recently expressed interest in acquiring the company, some with an eye towards turbocharging their relatively weak online reach.
“We are already profitable,” he said. “We don’t want to raise money for survival; we want to raise money only for growth.”
The $8 million in funding comes exclusively from Mitsui Fudosan Co., a Japanese real estate developer. Mitsui invested, in part, for an under-the-hood look at Movoto, according to Haque. Mitsui will also pay Movoto undisclosed consulting fees for help with building an end-to-end real estate platform covering Japan.
Haque said Mitsui receive a minority stake for its investment, but he declined to disclose further details. A person familiar with the deal, however, said Mitsui’s investment valued Movoto at somewhere in the neighborhood of $80 million. That would mark quite the comeback for the firm. Managers purchased Movoto for less than $1 million, according to the source.
Movoto will use the cash to improve its experience for consumers and “engage them over a much longer period of time … and then create much better long term value,” Haque said.
Like Redfin, Movoto stands out from some other well-funded real estate tech companies because it has both a top-ranked national site and the ability to serve consumers directly with in-house agents. By comparison, Zillow has a hugely popular site but doesn’t have in-house agents. And Opendoor and Compass have agents, but relatively less-visited websites.
“[We] have an end-to-end platform because we start with the customer journey from the property search and research level, and we can take the consumer all the way to closing the transaction,” Haque said. “There are companies who are claiming this, but look at their overall national traffic.”
Movoto’s unique position in this regard explains why a number of big industry players are eyeing the firm as a potential acquisition target, according to Haque.
“We are getting active inbound interest because of our growth,” he said.
He declined to name the interested firms, citing “ironclad” nondisclosure agreements. But if Haque is to be believed, we should not be shocked if an industry giant with a relatively weak online presence scoops up the firm to turbocharge its reach.
Movoto has grown both its website traffic and brokerage operation significantly since striking back out on its own, according to Max Diez, vice president of real estate operations at Movoto.
Traffic jumped more than 70 percent in 2018 and is on pace to do so again in 2019, he said. Meanwhile, Movoto has accelerated its shift from an exclusive focus on lead generation for outside agents to serving more customers directly with its own agents.
About 240 real estate agents spread across seven offices in Nevada and California now hang their licenses with Movoto, up from five agents and no office in 2016, according Diez. Movoto’s brokerage closed over 700 transactions in 2018 with its in-house agents, and is on pace to ink 1,100 this year, he said.
But the firm still makes most of its money by connecting buyers who search its website with agents at outside firms, charging referral fees if those buyers convert into transactions.
It generates between 80,000 and 100,000 leads per month, with around 3 percent of those converting into deals for the agents who receive them, according to Diez. Most of these leads go to a “partner at the national level” that Diez declined to name. Some also go to a network of partner agents at other firms that Movoto has built up over the years.
For its in-house agents, Movoto serves up a lightweight customer relationship management system, mobile app and third-party transaction management system. It also uses artificial intelligence to guide agents through the process of connecting with and maintaining relationships with clients. Agents might be prompted to contact clients based on their recent activity on Movoto’s mobile app, for example.
Unlike most brokerages, Movoto’s agents do not pay commission splits to the firm. They fork over a monthly fee of around $500 instead, as well as a transaction fee for every deal they close. The transaction fee increases with the value of the deal. It would be about $750 for a $500,000 home sale, Diez said.
Like Redfin agents, Movoto agents receive lots of online leads thanks to Movoto’s popular search site. But unlike Redfin agents, they are independent contractors with a longer leash to operate as they please, set their own fees and build largely independent businesses, Diez said.
By contrast, Redfin’s employs salaried agents. This model carries high fixed costs and can constrain the pace of growth. But it allows Redfin to exercise nearly full control over the customer experience, such as by requiring its agents to use all of its tools and adhere to clearly-defined protocols and business practices.