Scott Murphy AVG Blog September 10, 2020

Disrupting the Antiquated Residential Real Estate Market

Real estate is one of the largest asset classes, globally. Compass is disrupting the residential real estate market through a blend of technology, design, and human touch.

Compass: Disrupting the Antiquated Residential Real Estate Market

September 10, 2020 | Scott Murphy

Real estate is one of the most dynamic industries in terms of market trends, certainly in our post-COVID environment. Yet, it’s remained mostly static in practice, with relatively little advancement from the core business model besides listings moving online. With a multi-trillion dollar market in residential real estate, the opportunity for an innovative player is significant. 

Compass, an Alumni Ventures Group portfolio company, has been disrupting the antiquated residential real estate market since 2012. The company’s innovative platform uses a blend of technology, design, and human touch to develop a network of high-performing agents in key markets across the country.


Strategically Recruiting Top Talent

Compass uses its technology platform to recruit top agents, and make them significantly more successful. Each of Compass’ agents operates using the company’s agent-specific mobile app, which features constant iterations driven by the real estate agents, leading to a highly functional best-in-breed service. To date, Compass has more than 17,000 agents supported by 26 local offices across the country. 

Compass’ products, on average within one year, have increased brokers sales by more than 35 percent. This increase in production leads to two strong comparative advantages for Compass: above-industry-average commission splits and broker retention rate: 

  • At recruitment, to attract top performers, Compass offers above-market fee splits. After year one, when brokers are able to see the value of Compass’ platform, the firm is able to renegotiate to a level that is in its favor. 
  • Compass has a 99 percent retention rate, which in turn reduces two of the highest costs in the real estate business: the cost of broker acquisition and the cost of training. 

For clients, Compass aims to lessen the time home-searchers waste pouring through duplicate listings on Zillow or real estate company websites by presenting verified listings and charging what it promises are fees lower than those of traditional brokers. 


Achieving Results

By the end of 2019, Compass was 2 years ahead of the aggressive business plan they provided to Fission Ventures just 12 months earlier, and had become the third largest residential real estate brokerage in the U.S. In 2020, Compass has continued to perform, with revenues as of late May, the height of the lockdown, up almost 50% over the same period in the prior year.


Alumni Connection Opens Up High-Potential Deals

AVG’s funds frequently leverage alumni networks to access deals and build relationships with entrepreneurs and other VCs. This provides a unique, robust deal pipeline for our investors. AVG accessed a deal with Compass through Fission Ventures, a fund for the Columbia community

Compass Founder and CEO Robert Reffkin is a graduate of Columbia College and Columbia Business School. Compass’s CFO Kristen Ankerbrandt is also a Columbia College graduate. Fission Ventures Principal, Marco Casas (now with AVG’s Seed Fund), met Reffkin while attending Columbia Business School in 2015. When Compass began raising a $400 million round in 2018, led by Softbank, Casas and Fission Ventures Managing Partner Rob Bibow reconnected with Reffkin to discuss a potential allocation. 

Fission Ventures sponsored the firm’s investment in a $400 million Series F in 2018 and the $370 million Series G in 2019. Other AVG funds that invested, include: Congress Avenue Ventures (for the U Texas community), Nassau Street Ventures (for the Princeton community), Strawberry Creek Ventures (for the UC Berkeley community), Spike Ventures (for the Stanford community), Towerview Ventures (for the Duke community), Waterman Ventures (for the Brown community), Westwood Ventures (for the UCLA community) and AVG’s Total Access Fund


Feature Photo: Dimitry B.

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