Four years ago, tech entrepreneur Avi Dorfman sued Compass and CEO Robert Reffkin, claiming they implemented his ideas and then cut him out of the action. It turns out Dorfman is aiming to collect nearly $200 million from the firm, recently valued at $4.4 billion.
Dorfman’s specific monetary claim — which hadn’t been disclosed publicly — was revealed during a hearing last month in New York Supreme Court. At the hearing, lawyers for the SoftBank-backed brokerage disputed Dorfman’s claim that he is entitled to a 15 percent stake of the company at founding, according to a transcript of the court appearance. Using back-of-the-napkin math, sources said that 15 percent stake would have been diluted to around 4 percent of the company’s shares after multiple fundraising rounds.
“We believe Mr. Dorfman has a very strong claim as one of the founders of Compass,” his attorney, Arun Subramanian, told The Real Deal. “We look forward to having the evidence heard by the Judge and a jury.”
Dorfman sued Reffkin in 2014, claiming the chief executive used a concept they worked on together in 2012 as the basis of a company that later became Compass. At the time, Compass had just raised a $40 million Series B round that valued the startup at $360 million. The original suit did not specify damages, and subsequent court documents redacted the amount.
Both sides agree that in 2012, Reffkin offered Dorfman a salary of $80,000 plus a 2.5 percent stake in Compass. But Dorfman contends Reffkin later reneged on the offer, while Compass maintains that Dorfman turned the offer down in order to take a job at a hedge fund.
In a statement, Compass disputed Dorfman’s claim that he’s entitled to any money.
“Having spurned multiple offers of employment to join Compass in the early stages, it’s clear that Dorfman is now just seeking a do-over of that decision,” the company said.
In September, Compass raised $400 million from SoftBank and Qatar Investment Authority at a $4.4 billion valuation. Wellington, IVP and Fidelity also participated in the Series F, which gave Compass a total capital raise of $1.2 billion.
In 2016, the Manhattan Supreme Court ruled that Dorfman could continue to call himself a co-founder of Compass. The ruling was in response to Reffkin’s counterclaims, which alleged Dorfman had improperly presented himself as instrumental to Compass’ early fundraising and that he referred to himself as a Compass co-founder on his LinkedIn page.