Our belief in Compass, our first investment
Last Thursday, our portfolio company Compass began trading publicly on the New York Stock Exchange (NYSE: $COMP). Congratulations to Robert Reffkin, Ori Allon, and the entire Compass team for this huge accomplishment!
As our first investment, Compass holds a special place in our heart. The company has been part of our herd since its initial Seed funding back in 2012. It has raised over $1.5B in funding, from Seed to Series G. Alpaca is proud at how far Compass has come while never straying from its vision for the future of real estate.
Why we invested
We have always believed that Compass has occupied a space between tech and brokerage. Since its inception, the real estate technology unicorn has been on a mission to “help everyone find their place in the world,” building the first modern real estate platform that pairs top agents and technology to improve the home buying and selling experience. Robert was inspired by his mother, a single parent who supported her family as a real estate agent. He describes Compass as a company created to help real estate agents, a group of individuals he says are “remarkably underserved.”
The inefficiency in all human-centric brokerage transactions has always been bothersome to us and has been the basis for multiple investments within our portfolio (Compass, Transfix, Ocean Freight Exchange, Prevu). The opportunity to empower agents with technology looked like an amazing opportunity to us, but at the end of the day this was early and we had to believe in the founders. Rob has always been a leader with a vision and someone you would want to follow. His partnership with Ori gave us a high degree of confidence in their ability to attract A+ talent, the best agents and really be a technology driven company.
This quality is something that cannot be taught, and in times of uncertainty, Compass propels forward.
The future ahead for Compass
Today, Compass’ 19,000+ agents, who work as independent contractors under the company, have closed over $300B worth of deals from over 275,000 homebuyers and sellers. The company, which holds a 4% share of the national brokerage market, is the largest independent brokerage (as measured by gross transaction volume). On top of that, the company garnered $3.72B in revenue last year.
On Wednesday night, the company priced its shares at $18 per share. Compass closed the day, Thursday, with shares up almost 12%, at $20.15 per share. We support that it will only go higher from here.
The biggest question surrounding Compass continues to be, “Are they a brokerage company or a technology company?” They are clearly a technology empowered brokerage company. It’s provocative but what does that actually mean? They are at the leading edge of empowering agents to be the most successful and efficient agents. The same way that Salesforce empowers their clients to be better managers of relationships, that is one part of the puzzle here. The same way that HubSpot allows you better manage your marketing persona, that is another part of the puzzle. The same way that an Evernote or Notion keeps your organized…I think you get the idea. For the naysayers who think Compass is a traditional brokerage, let’s think through those companies that are clearly technology companies and not brokers (RedFin, Zillow, OpenDoor, OfferPad) and now ask yourself what barrier of entry really exists that Compass, with their capital, agent pool, and technology team, couldn’t begin to compete with tomorrow.
It has been a true pleasure to see Compass grow to what it is today and have a feeling that this is only the beginning.
Read a recap of Compass’ IPO and Ryan’s thoughts in The Real Deal.