Real Estate Brokerage Compass Taps Banks for IPO
Issue 8 - November 27th, 2020
2021 could be the year for hotly anticipated Compass IPO according to various news outlet.
From a recent article on Bloomberg: Compass, a SoftBank-backed company that’s among the largest real estate brokerages in the U.S., has selected underwriters for a potential initial public offering, according to a person with knowledge of the matter.
The New York-based startup is working with Goldman Sachs and Morgan Stanley ahead of a listing that’s slated for 2021, said the person, who requested anonymity because the information isn’t public.
The last private fundraising valuation Compass received was $6.4 billion dollars. Outsiders have long wondered if Compass can stand up to this hype once they enter the public markets. The "comps" for other real estate brokerage companies and their current public market valuations are the following: eXp Realty at $3.6 billion, Realogy Holdings at $1.43 billion, ReMax Holdings at slightly under $1 billion, & Redfin at $4.7 billion.
Compass has long touted themselves as a "technology" business, but their main revenue driver is from agent commission splits. Zillow is a true technology business that is wading into some more traditional real estate brokerage practices and entering the iBuying arena and their market capitalization sits at around $25 billion. Compass is a technology enabled brokerage firm that powers agents up to do their jobs more effectively at the end of the day, and they have been on an impressive growth streak over the last few years.
It will be interesting to see how public market investors view Compass once they file their S-1. Softbank is their largest investor, and they have had a rough few years with some of their other portfolio companies and astronomical private market valuations that don't hold up so well once they are visible for all to see. Will Compass be able to stand up to the hype?
I look forward to seeing Compass continue to push innovation in the ResiRe industry, and their entrance into the public markets lifts all boats in the industry in my opinion. The competition in the industry is only beginning to heat up, and I cannot wait for the next few years to see how things unfold industry wide with new business models and a changing of the guard from sleepy brokerage companies to rocket-fueled venture-backed firms like Compass shaking things up.
Oh also, don't sleep on our brokerage firm, Archetape - we are just getting started too. Have a great weekend.
Newsworthy Links To Share
CoStar Group has acquired HomeSnap and sets sights on Zillow to compete directly in the ResiRe technology space with agents and consumers. From a recent interview, CoStar CEO outlines a very different approach to the space than Zillow CEO Rich Barton: "We also are not going to ever create a brokerage firm. We’re not going to start hiring brokers. We also are never going to be buying the houses and trying to flip them. These are all things that are antithesis to what we want to do." Read more HERE.
Factory_OS raises $55 million from tech titans - Autodesk, Citi, Facebook, Google, Morgan Stanley and round leader Lafayette Square - to continue blazing fast growth path. Factory_OS can erect a 100-unit apartment building in less than 10 days, delivering housing over 40% faster than conventional construction can. Factory_OS is committed to delivering high-quality, tech-ready, cost-effective multifamily housing that is more environmentally friendly and creates new living-wage jobs, resulting in far-reaching community benefits. Read more HERE.
10 real estate technology companies named on Deloitte’s 2020 Technology Fast 500. The 2 highest ranking real estate companies on the list are Homie and Ojo Labs. Homie is a brokerage that lets buyers and sellers find a local agent on its website, and receive a number of technology-empowered discounted services as they go. Ojo Labs, the “artificial intelligence” and personal assistant startup, has several products to automate real estate consumer search practices. Read more HERE.
From @JonErlichman of Bloomberg News. He shared a list of products on his Twitter feed that didn't exist 10 years ago on Thanksgiving Day: Snapchat, Facebook Messenger, Apple Maps, Uber Eats, TikTok, Twitch Zoom, Lyft, Slack, Peloton, Ethereum, AirPods, Apple Watch, Google Classroom, Microsoft Teams, Alexa, Tinder, Telegram, Oculus, Tesla Model S , Apple Music, Chromebook, & Minecraft. Read more HERE.
"The Austin-San Antonio Corridor Could Become one of the World’s Top 10 Tech Regions, says Lanham Napier, CEO of BuildGroup". Lanham served as CEO of Rackspace for 13 years before launching venture firm Buildspace which is headquartered in Austin,Texas. Read more HERE.