Veteran broker Leonard Steinberg shocked many in the New York real estate world last year by ditching Douglas Elliman — after becoming one of its top agents during a 13-year run — for Compass, a New York City startup recently valued at a stunning $800 million. In August, Compass opened an office in Miami, where it plans to move to a more permanent space on Lincoln Road and swell its Florida roster to 100 agents.
Steinberg, 50, who now serves as the president of Compass but still works as a broker, said the chance to build a business was too good an opportunity to pass up. Compass granted him an equity stake in the firm, which today has 300 agents and seven offices. Washington, D.C. is its other market.
Some investors seem to like what they see: Since launching in May 2013, Com pass has captured $123 million in venture-capital funding. Yet some critics have taken issue with the company’s shifting business plan and long-term strategy.
Steinberg now works at Compass headquarters in New York’s Union Square, making frequent trips to Miami. In an interview with The Real Deal, he talked about the technology of Compass as the company’s “secret sauce,” how its expansion in Florida has been a natural next step and why he plays piano but only in private.
You and your partner Herve Senequier placed sixth in The Real Deal’s ranking of top brokers in spring 2015, with $332 million in listings. You were doing very well at Elliman. Why leave?
There was an opportunity for me to build and create something with people who were thinking on an equal footing. And I had sort of reached the top at Elliman, selling $1 billion worth of real estate in a single year. You have to do something different after that.
In just two years, Compass has been valued at $800 million and big name investors have flocked. Why?
There’s a lot to like. People like to pigeonhole us as a technology company or a traditional real estate brokerage but I think we’re both. The technology was not designed to replace our brokers but enhance them.
What is this special technology?
Clients often say that they can’t stand brokers’ attitudes, and a lot of that attitude comes from being stressed out, running around, waiting to get to their desk to get things to happen. Our technology provides a menu; you click on points that are important for the consumer. [This tool] summarizes [the data] and sends it to the consumer on the spot. If you can do all those things immediately, you are saving yourselves lots of time.
Some analysts say that technology, not the brokerage business, has lifted your valuation. Any plans to license the technology? Or sell the company like with other tech startups?
Look, there are a lot of cards on the table right now. We have come to an old-fashioned industry and shaken things up. Uber did not invest in town cars but made the process of hiring one unbelievably convenient. Time is the last luxury.
Will the company be sold soon?
Not at all. There is a long-term commitment from everyone at the company.
Since you’ve launched, you’ve switched names from Urban Compass to Compass, and your focus on rentals has given way to sales, among other changes. Why the flux?
Every new company starts out and makes mistakes. But Compass is incredibly unusual in that it recognizes its mistakes quickly and changes course quickly.
What about your employment model? Agents were paid salaries at first, but now commissions.
Agents love independence, and they build their own little world under an umbrella. Giving them salaries was not the way to do it. It did not give them the sense of independence that makes for great agents. If you walk into Bergdorf Goodman, the salesperson who is outstanding is getting a commission.
Why Miami as your third market? Why not the Hamptons or Los Angeles first?
We have a tremendous amount of New Yorkers wanting to have something connected to them in Miami. It’s like an automatic demand item. I think Miami has almost become a suburb of New York.
Tell us about your music career.
I tried to be a professional musician. The music I wrote was classical New Age; it was music that soothed. But no one wanted to buy it. I still try to play the piano pretty regularly, but I’m certain to close all the doors and make sure no one is in the room.