The New York City based real estate brokerage, named Urban Compass, raised $40m recently. This is on top of the previous $25m capital raise not so many months ago.
The PR spin is that Urban Compass is doing so well, its investors are begging it to take more money and expand into more US cities.
At its core, Urban Compass is 'just' a brokerage. So the potential size of its market is... tiny. It is not unreasonable to cap its potential at 1% of New York City's real estate transactions. There are just too many real estate agents in New York City working for other brokerages. And unless you live in fantasy-land, real estate is a game that requires people to do deals.
So what about all this tech, sorry, amazing tech, that Urban Compass is spinning up? So far, there has actually been very little tech that is useful. Certainly nothing game-changing. If there was, then you would have had the Press Release some time ago.
Just to be clear, Urban Compass started out talking about rental property. Then it realised there's more money in sales. Then it scraped its business model and realised better people want to be paid better, so they reverted to a traditional sales commission structure.
It seems to me that Urban Compass is being run by some exceedingly smart, and very inexperienced people who don't 'get' real estate. Why are they smart? They understand their target demographic: Silicon Valley VCs. They know the Private Equity world, what to tell and show them to keep the cash coming until they offload the venture to a big PE house. When the music stops, PE house number 1, 2, or 3 will be left standing and thinking ****.
That's typically how this works. I hope Urban Compass is a more sincere venture than throwing darts aimlessly at a map. I hope they understand their geographic based brokerage model is the same thing that has existed for many years, and they are still a few pivots away from 'getting' what the next big thing in Real Estate is.
To end on a positive note, how inspiring is CEO Robert Reffkin. Check out this video, especially 4 minutes in where he talks about the glass half full or empty test when hiring: http://www.youtube.com/watch?v=iSg1uT2wmhk#t=302
Inman News reported on the Urban Compass fundraising a little while ago: http://www.inman.com/2014/07/21/urban-compass-valued-at-360-million-in-latest-funding-round/