The Real Deal New York

Compass hits $1B-plus valuation with Series D round

Resi brokerage raises $75M in round led by Wellington Management Company

August 31, 2016 10:00AM
By Katherine Clarke and E.B. Solomont

From left: Ori Allon and Robert Reffkin

Compass has leapfrogged past a $1 billion valuation after raising a $75 million Series D round, according to Bloomberg. The round, led by Wellington Management, means the residential brokerage has raised $210 million from venture investors.

This is the first investment in Compass for Wellington, an operator of mutual funds that has bet on companies such as Aribnb, Redfin and WeWork, as well as Jessica Alba’s Honest company, Warby Parker and Joshua Kushner’s health insurance startup Oscar. Repeat investors in the Series D round include Institutional Venture Partners and Joshua Kushner’s Thrive Capital.

In July, The Real Deal first reported that Compass was looking to raise the funds, seeking a valuation of between $1.2 billion and $1.3 billion.  The brokerage last raised a $60 million Series C financing in September, at which time it was valued at $800 million.

“This funding will provide us with additional resources to accelerate our growth into new markets and inject transformative technology to improve the experience for consumers and agents,” Ori Allon, the co-founder and chairman of Compass, said in a statement.

It’s not clear how much equity Compass’ founders gave away in this round. In prior rounds, Compass handed investors nearly 44 percent of its shares, according to data from PitchBook.

Compass, which launched in New York in 2013, now has a presence in Washington, D.C., Miami, Boston, the Hamptons, Cambridge, Beverly Hills, Malibu, Pasadena, Santa Barbara, and Aspen. It’s slated to open in San Francisco later this year.

In New York, the company has recruited top brokers including Leonard Steinberg and Kyle Blackmon.

The latest round comes as the market for venture capital has tightened. Even successful startups have been raising “down rounds,” which give them lower valuations than prior rounds.

For Compass, lingering skepticism about its business plan has been a focal point for critics, particularly at rival firms.

Earlier this summer, CEO Robert Reffkin told TRD that growth, rather than profitability, was the immediate goal of Compass’ fundraising effort. “The luxury of our capital base is that we can think long-term,” he said. “[Investors] are making an investment alongside the management team.”

Reffkin didn’t rule out an IPO, but said going public is “more likely than not,” though it’s “not the goal.”

One thing TRD discovered at the time was that the firm’s performance metrics — it claimed its agents generate over $6 billion in sales volume annually, a number that’s now pegged at $7 billion — were heavily based on historical performance of those agents, in many cases from well before they joined Compass.

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