Urban Compass raises $40M from Salesforce CEO, others

UPDATED 10:00 a.m., July 22: The industry’s collective puzzlement over Urban Compass just turned into befuddlement. Less than a year after raising $25 million from blue-chip investors such as Salesforce’s Marc Benioff and Condé Nast parent Advance Publications, the real estate technology startup announced this morning that it raised another $40 million, valuing the company at a staggering $360 million. The Series B funds came from mostly existing investors — including Benioff and Advance Publications.

Ori Allon told The Real Deal today that the company has yet to spend the vast majority of its Series A cash. “No company goes to seek investment nine months after raising so much money,” he said. “We barely even touched the initial money – most of it is still there.” Instead, Urban Compass’ Series A investors took notice of the company’s rapid growth and came to him, Allon said, making it very clear that expansion – in New York and nationally – was the order of the day. Joshua Kushner’s Thrive Capital, .406 Ventures and Founders Fund were the other repeat investors, while American Express CEO Kenneth Chenault made his first bet on the company in this round, according to CrunchBase.

“It’s not something your typical venture-backed company can pull off,” said the CEO of another New York-based real estate tech startup, addressing Urban Compass’ ability to raise big dollars so soon after its Series A in September. “A lot of it is based off the track record of Ori Allon. I think it’s insanity but at the same time I’m very jealous.”

Allon — who sold his previous two companies to Google and Twitter — declined to disclose specific revenue figures, but a source familiar with the company said that its monthly revenue, even after agent commissions are paid out, is comfortably in the six figures, and that the revenue has grown ten-fold since last year.

Urban Compass has been New York real estate’s biggest enigma – and its most successful fundraiser – since it launched in May 2013. Sources said the company’s ability to position itself as a tech firm rather than a nuts-and-bolts real estate firm allowed it to attract deep-pocketed tech investors, who can be much more bullish on growth potential and what companies will be worth than traditional real estate investors. The firm recently poached top-producing brokers Leonard Steinberg and Hervé Senequier from Douglas Elliman, the city’s largest residential brokerage, and Allon said that he’d look to attract more top talent to New York. The company recently took new 25,000-square-foot digs at RFR Realty’s 90 Fifth Avenue.

Additionally, another office in either Washington, D.C., Boston or Chicago is in the cards, Allon said. “The technology is scalable- we don’t’ need another team of engineers,” he said. “What we do need is more agents on the ground.”

A recent report by real estate consulting firm RE: Tech showed that the real estate tech industry pulled in at least $700 million in funding over the last two years, as TRD reported. Ashkan Zandieh, RE: Tech’s founder and the author of the report, said today that “Urban Compass has taken the original brokerage and commission model and has made real estate services human and marketable.”

Residential real estate insiders, however, have dismissed the company as smoke and mirrors, pointing to its inability to nab exclusive listings and its decision to change its business model just a few months after it launched. Urban Compass put an end to the exclusive listings chatter when it hired Steinberg and Senequier, who brought over about $250 million worth of listings from Elliman. But concerns about the company’s staying power remain, and there is bound to be disbelief about today’s news.

Allon said that people were free to be skeptical about the company’s future. “We have a very clear path – we know what we want,” he said. Pointing to the size of the market and the firm’s growth rate, Allon said that the $360 million valuation was based on real, hard numbers. “It’s not out of thin air,” he said.