March 29, 2019 • 26 mins
This is a Closer Look at Robert Reffkin. He was a White House Fellow, where he spent a year working with Treasury Secretary John Snow. In 2012, he co-founded Real Estate tech disruptor, Compass, with partner and technology expert, Ori Allon. He also raised $1.3 million to help the Success Charter Network open its first school in the Bronx and he ran 50 marathons in 50 states to raise $1 million dollars for education. Robert Reffkin joins former SEC chairman Arthur Levitt to talk about the company he started in a single downtown Manhattan office, now valued at 4.4 Billion dollars.
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Speaker 1 (00:00):
This is a closer look with Arthur Levitt. Arthur Levitt
is a former chairman of the u S Securities and
Exchange Commission, a Bloomberg LP board member, a senior advisor
to the Promontory Financial Group, and a policy adviser to
Goldman Sachs. This is a closer look at Robert Ravkin.
(00:21):
After spending two years at Mackenzie and to a Lazard,
he became a White House Fellow, where he spent a
year working with Treasury Secretary John Snow. He then returned
to banking, spending five years as a vice president at
Goldman Sachs and as then President Gary Cohen's chief of staff.
(00:46):
But in two thousand and twelve, he co founded real
estate tech disruptor Compass with partner and technology expert Or Along.
Starting from a single down town Manhattan office, Compass has
raised one point two billion dollars from investors including soft Bank,
(01:09):
and is now valued at four point four billion dollars.
He joins me now for a closer look. Robert, you
had solid career at Goldman Sacks, something many dream of
when you change course to start a real estate technology company.
(01:29):
Tell us the story of how this started and how
you met your partner on Allen and what he brings
to compass. Yeah. Absolutely, I UM, with my background actually
grounded in real estate. My mom has been an agent
my entire life, the first half as a life insurance
agent actually and in the second half as a real
(01:51):
estate agent. And so I had seen her to move
from firm to firm to firm, hoping that you would
get the support tools to realize her dreams as an
agent and really as an entrepreneur running a small business.
She never got that. And so that's going to where
I saw the opportunity to build a company that can
(02:12):
improve the quality of life and the potential career potential
of agents UH in the country. And when I was
at Goldman SAX, I saw how there were thousands of
people on the technology seeing their building tools for bankers
and traders. I just thought, if we can we can
(02:32):
create a company that can take those kinds of resources
and build not for bankers and trade as a build
for real estate agents. UM, you know what that could
do for people like my mom. And Ory alone has
sold one company to Google, another company to Twitter, UH.
And I met him when I was working in the
White House, UH, and we just became friends over the years,
(02:52):
and that's the person that I reached out to to
start the company. When you survey the agents, what were
the main concerns that was holding them back from better efficiency?
So the average agent in the country logs into leven
companies to do their job every day. So there are
(03:13):
over five hundred software providers that are selling to agents
given parts of the real estate experience, from valuation tools,
to scheduling open houses, to UM taking open house sign ons,
um search, CRMs, and the list goes on and on.
Marketing materials people lose with as personal websites. There's so
(03:35):
much part. There's so much of the actual workflow of
an agent. And the main problem that UH that I
heard over the years when surveying agents is has link
take all this friction and fragmentation and create simplicity and harmony,
bring everything into one end to end platform. You said
(03:56):
that what really differentiated you from most other real estate
companies was the diverse experiences of your colleagues. Is this
why you think your initial fundraising was so successful in
providing something that investors really like. Yes, So, from an
(04:17):
investor perspective, real estates the largest segment of the global economy.
The value of real estate in the world is two
and seventeen trillion dollars. That's four times the size of
every public company combined. Um. It literally real estate defines
are are It's like the economics of our physical space,
and it defines where we work in with and so
(04:39):
it's it's the largest legacy business that has not been
improved by software. So I think investors um UH had
a sense that there's there are very few industries left
that haven't really been improved, healthcare being one, real estate
another which is a larger one. And I think they
were also inspired by that we were building for agents,
(05:03):
were seeing them as the customer, where all the other
major software companies in real estates UH, we're really viewing
agents as the key stakeholder in the business. Could you
give us some examples of a problem that you are
technology solve for agents. I would say a problem that
(05:26):
it solves is suit marketing. For one, agents are likely
the largest group of marketers in the country. They're sending
digital newsletters, postcards, mailers, um social media every single day
of marketing themselves as Hey, I'm a great agent, work
with me in marketing their properties on behalf of their
(05:47):
sellers to sell the properties. Um. We created something called
Marketing Center, which is a tool that allows them to
have the power of a professional designer using Photoshop, but
in the palm their hands. Instead of having to hire
designers to do that work for them, they're able to
do their empowered to do it themselves through through our
(06:09):
same end to end platform which connects to all of
the liftings and connects to their theorem as well. Is
the way that Compass deals with agents and commissions significantly
different from other brokerage firms. Our approach to commission splits
is we we go into a market and we take
(06:30):
the same schedule as one of the largest two players,
and then we give a small incentive to the earliest
people that come on. Now, you just acquired a company
called Contactually, a one based CRM platform. What is this
and how does it add value to Compass. Contactually was
(06:52):
the most popular real estate CRM in the country. And
the goal of the CRUM is it helps an entrepreneur
wake up in the morning and know who to call
UM and UH and so we It's kind of think
about as the heart of of an agent's business because
(07:14):
all their contexts are there UM their buyers and their sellers,
and it tells them based off the information that's happening,
whether it could be their birthday, whether it could be
their anniversary or buying their home, whether it could be
that they're searching the site to reach out their clients
with a certain type of communication that helps build the
(07:36):
relationship and help their client needs. We've asked about what
Compass offers agents, but why should a home buyer choose Compass?
But the home buyers should choose Compass because we have
the best agents. Uh. And so what it means by
that is UM we give more service support, technology marking
(07:59):
to agents, which allows the best agents to come to Compass.
And really, when you're working when when you're working with
an agent, they're doing the majority of the work. When
they're the small business owner, we're just an infrastructure of
supportive platform to allow them to have more time to
better serve their clients. So think about it in a
different way is to say the same thing. If of
(08:22):
the average ages time has been on non core administrative
and arts and craft tasks, UM at Compass, we give
them more of that time back with our support and
tools so they can better serve their clients, and how
does the agent compensate you. So they compensate us the
same as they do in in each of the major markets.
(08:46):
And so that's basically a commission split where percentage that
goes to the company and a percentage percentage of that
goes to the agent. Would you say that Compass has
become a traditional real estate brokerage but with cut edge
tech and has that evolved in a different way than
you originally imagined. Yeah. When we first started, we were, uh,
(09:09):
we were a small little company in New York City
focused more on rental agents UM. And so you know,
we we've definitely grown much further than I have respected.
And we started this company working out of the Chelsea
Piers UM facility where UM it was actually a New
(09:29):
York Law and Order UH police station STEP and so
we've definitely now we have over two hundred options in
the country where UM we're in the top twenty major
markets in the country. You have over ten thousand agents
in the country and we're number you know, one or
two in the majority of the markets were in and
(09:51):
so you know, it's definitely we're well beyond whatever I
thought was possible. UM and It's really reflection that when
you have, when you bring great people around you that
have big dreams and a lot of passion, they're going
to build a future above and beyond what, you know,
what anyone person would expect. How do you keep the
top agents? Won't there always be a new toy someplace
(10:16):
else for them to pursue. Yeah, Unfortunately, the real estate
brokerage model is in a kind of it's a a
Netflix Verst Blockbuster moment. The brokerage firms haven't improved in
any meaningful way for many years. She asked the average agent,
what do you have today from your brokerage firm that
you didn't have a year ago. They usually always say nothing.
(10:40):
It's the same thing the year after. After you think
about the cable UM and so, uh, brokesh terms aren't
aren't aren't building technology there? If they're doing anything to
pay a third party provider to integrate different components of
other people's technology, um and so we aren't seeing our
(11:02):
agents leave Compass in any meaningful way to go to
to other companies less. Last year, only one percent of
agents less Compass and so a one percent turn. We
feel pretty good about you've added technology to the most
basic marketing tool before sales. Sign How does that work?
(11:25):
So we have a real estate sign um that is
um that lights up at night. And the way that
we thought about it is real estate signs have not
been improved or innovated upon you over forty years. It's
the exact same thing. And again a reflection at the
brokerage firm has been okay with okay, the good is
good enough. And so you know, we took an approach
(11:47):
that if we're going to redesign a sign becoming like Apple,
we're going to create a sign, what would it look like?
And so we have very different materials, metal, different shows.
It glows at night when you it connects to iPhone
downwards and captures data like how many people are walking by,
(12:07):
how many iPhones connected to it? When iPhone connects you
to get proprietary information around the listing and sort of again,
every part of what real estate is. We want to
get better and better every year. If a real estate
broker decides to change the way he operates or she operates, uh,
(12:29):
would he see anything different in coming to compass in
terms of his compensation for selling a home. Yeah, So
the real estate broker comes to Compass they have. They
charged the same commission to their clients that they would
at another company, So there's no difference in terms of compensation,
(12:53):
but apparently there's a big difference in terms of services
to that real state agent exactly. So agent and Compass
when they got a seller, they're able to offer things
like Compass Countires, which offers staging, landscaping, roofing, flooring, cosmetic
(13:15):
repair services to the sellers. Is Compass involved in commercial
real estate as well as residential? We're yes, you're in
commercial as well. We've focused more on residential, but we're
also in commercial. Are other large companies such as Carcran
doing anything to compete against Compass? You know, there are
(13:38):
a lot of good brookrages out there that are all
working hard to help their agents. You have the best
quality of life and support. But I do believe that
our ability to raise over a billion dollars and to
hire people from inside and outside of real estate to
some of the best companies um in the country, from
(14:01):
places like Apple, Pixar, common Ass, Loreale, the moment Google,
I think it allowed us to give a level of
service to our agents and their customers that other companies
aren't able to preside. How did you go about raising
over a billion dollars in each round? It was fairly
straightforward and none of the rounds took more than a
(14:22):
few months. Uh. I believe our results of being able
to grow at triple digit growth on triple digit revenue,
So a hundred million dollar plus revenue with a hundred
percent plus growth, that's you know, they're probably less than
twenty companies in the country that have grown at that rate. Um,
and so I think I think there are there are
(14:43):
a lot of investors that want to grow. They want
to invest in companies that can build the future of
their industry, build a platform for an industriere's largess real
estate and so um it's been it's been pretty straightforward
to to raise the money raised over the years. Did
you have an investment bank or do the rais or
did you do it on your own? We've done all
the rasors on our own. Based on your experience in
(15:06):
scaling your business, what advice would you give other entrepreneurs
who are deciding when to scale their business. I would
wait to scale your business until you have product market federals.
You don't know if you're scaling the right business. UM.
And a tell sign is does the customer? Does a
(15:26):
customer love what you have? Um? And until a customer
really loves what you have, I wouldn't scale it. And
I don't think it's good enough for a customer to
like what you have because that's not meaningful enough. And
say this world and really they really need to love
what you do. When you think about Instagram, people love
it so much they're looking at all the time. People
need to really love your product. It's reported that you
(15:49):
have a plan for the company. What is that and
how would you achieve the goal? Yeah, our our vision
is to realize in the top twenty. It is by
the end of UM. We're already there in Washington, d C.
With twenty market share. We're there in uh, San Francisco
(16:11):
and and sort of m Valley, UM where there in
a number of the markets were in. So we just
got to keep doing what we're doing, which is focus
on given agents the best service and truly that the
real ambition is to build a company that improves agent
life so much they can't imagine litten about it. And
you know, we're not there, that will probably never be
(16:33):
there because I want to always get better and better
and better. But if we can focus on our customer
in a world where they've never been a company with
a immendous amount of resources, whether Golden Google, Chevron, General Electric,
whatever company you you can think of, it's never been
a company like GUS look at agents like a customer. Uh.
And so that's that's where we have to continue to
(16:54):
focus and differendships. If there's a real estate broker, let's
say in Stewart, Florida, working for a local firm, would
he be able to sign on to Compass and work
for them as comfortably and profitably as working for the
(17:16):
local Stewart, Florida firm. Yes, Uh, she or he was
definitely be able to work at Compass as easily and
possibly as as another firm. Um. There are some firms
in the event that are discount firms where they charge
(17:36):
the agents nothing. So we're not that. But but for
the premier firms, we always charged at the market rate,
and so here they would be able they would have
that same um, they have the same profile. What's your
vision for what more is possible in changing the real
estate industry and do you have plans to move on
to other industries that need change. We wanted to realize
(18:00):
the greatest real estate dream of the last twenty five years,
which is one stop shopping, not just a place where
consumers can come in search, but where everything is in
one platform. Mortgage, title, insurance, escrow, inspectors, movement services, everything
in one place. Create harmony in simplicity and the real
(18:23):
estate process. And this is an industry full of friction
and fragmentation. You want to bring things together and create
the implicity for both the consumer and the agent. How
does the overall economy look to you right now? I
think the economy is stable. I don't see anything in
the mirror term that's going to dramatically improved or create
(18:47):
know um, intimistic and trouble in the economy. And there's
nothing that received through UH in real estate that creates
an indication of that as well. You wrote a piece
all startups need leaders not bosses. Could you explain what
you mean and how does this guide you as a leader.
(19:07):
I think the most talented people out there, which you
obviously want to bring to your company and to do
great things, you know, they they don't want to be
told what to do. I think I think bosses just
tell people what to do. I think leaders have to
do three things. That the ground the company in reality.
They have the revision of where you want to go,
(19:30):
and then create a path to that vision. And then
you know, then allow people to make that all the reality.
You said you filled your office with entrepreneurs. What do
you look what do you look for? And how do
you ascertain whether someone is entrepreneurial? And so we have
(19:51):
a couple of entrepreneurship principles. First, at the dream big people.
Your your ambition is to count your potential. So you
have to really big people that move fast, not people
that are in the comet room and feel good after
two hours of being on a white board. People that
actually want to make their their ideas of reality and
(20:11):
move fast. And people that learn from reality, learn from others.
And people that are solutions driven, that collaborate that ego,
that obsessed about opportunity, and I think you obsessed about
what you love and and that's a good thing. So
if you're not obsessed about your work and you don't
love it enough to be great at it, people that
maximize their strengths and focus. Now some try and make
(20:32):
weaknesses that have really focus on their strengths and and
surround them of those people that offset their weaknesses. And
lastly people that bounce back the passion. One of the
great things about agents is they're the kinds of people
that can can have, you know, significant challenges and still
move forward. Think about the kind of person that can
knock on ten doors, gets it known to every single
(20:53):
one of them, and still move forward to the leven.
But those are the eight entreprenurship principles of the company.
You say that American needs You, an organization that you
founded in two thousand and nine has been able to
achieve great things. What what are some of the things
that American Needs You? Is all about Ten years ago.
(21:15):
I started a nonprofit called an America Needs You. It's
now in four different states and serve students who are
first in the family to go to college and below
the pobby line. It gives them cleer development, college support
in two summer internships, um and you know, we have
(21:36):
meant one on one mentorship with each one of them
and we meet every two to three weeks over the
course of the treater period. Eventually, you say that American
needs You could wade into policy to have a greater impact.
What would you want to advocate for That's a great question.
It's always been my dream. Now I'd like to dream
(21:57):
big is that the alumni of American Needs view UM
students in the mentors. You can become an advocacy group.
And what I would love for them to be able
to focus on us altogether is on education. Education has
been the most important pathway to realizing potential in this
country and beyond. And I think a lot of areas
(22:18):
were I'm doing from millennials age five to thirty four,
homeownership is eight percent lower than Baby boomers at that age.
Is student debt's still hanging over this market? Yes, student
debt is increasingly Involvement is probably you know, one of
the one of the big bubbles that were weird ugly
(22:39):
head and the decades to come. What are you saying
with this group but me personally, you know, we're not
seeing as much because you know, the buyers at homes
tend to be an older UM. But just from what
you know, what I read about the in the world
around us, there there there may not be enough UM
(23:00):
post college to cover the student debt that's realizing college
as a country. Now, the FED is about to act
in terms of interest rates. Do you have any hopes
for what they do? Do you care about their next move? Absolutely?
Hopefully they are flat abound, So it's always better for
(23:21):
real things, right, All tech startups worry about a newer
technology making their business obsolete overnight. Do you hope that
your tech hub keeps you on the leading edge? Yeah? Absolutely.
I believe a check will she doesn't leave an edge
because it's it's uniquely serving the agents um and I
(23:43):
believe whoever creates the most value for agents in this
country will create the platform for real estate in this country.
Now compasses launching a technology campus in Seattle, hiring a
hundred engineers, What are these engineer is going to be doing?
What do you have planned? Yea, So we were still
(24:06):
valuing the right part of the platform for them to
focus on. But it may be transaction management and the
actor market. So those some most probably we talked about earlier,
mortgage title insurance, ESCRO movements is going beyond just the
transaction to what happens afterwards, and you need a hundred
engineers to do that work. You know, we already have
(24:29):
over two hundred people on the product engineering team. In
uh in the company, and you know, we would like
to end the year with around four hundred. Have you
had any challenges that you didn't expect. I had a
lot of challenges that I'd expect, but I'd say the
one that I didn't fully appreciate is the importance of culture. UM.
(24:53):
And I've obviously seen it in my nonprofit life, where
it's encounted American medio empathy, Americans wanting states reasonally do
not profits. And I've heard people talk about in the
companies I worked in before whether the kings or blemis
but culture really is everything UM and somebody can put
(25:17):
not focus on As a company. He worked at Mackenzie
Goldman Sachs and as a fellow in the White House.
He founded America Needs You, a nonprofit that provides career
development and membership to first generation college students, and in
two thousand and twelve, he co founded real estate technology
(25:40):
startup Compass, which was recently valued at four point four
billion dollars. Robert Revkin, thank you for joining us. By
the way, if you have comments about the program or
suggestions for topics, please email me at a Closer Look
at Bloomberg dot net. That's a closer Look one word
(26:04):
at Bloomberg dot Net and follow me on Twitter at
arthur Levitt one word. This is a closer look with
Arthur Levitt.
This is a closer look with Arthur Levitt. Arthur Levitt
is a former chairman of the u S Securities and
Exchange Commission, a Bloomberg LP board member, a senior advisor
to the Promontory Financial Group, and a policy adviser to
Goldman Sachs. This is a closer look at Robert Ravkin.
(00:21):
After spending two years at Mackenzie and to a Lazard,
he became a White House Fellow, where he spent a
year working with Treasury Secretary John Snow. He then returned
to banking, spending five years as a vice president at
Goldman Sachs and as then President Gary Cohen's chief of staff.
(00:46):
But in two thousand and twelve, he co founded real
estate tech disruptor Compass with partner and technology expert Or Along.
Starting from a single down town Manhattan office, Compass has
raised one point two billion dollars from investors including soft Bank,
(01:09):
and is now valued at four point four billion dollars.
He joins me now for a closer look. Robert, you
had solid career at Goldman Sacks, something many dream of
when you change course to start a real estate technology company.
(01:29):
Tell us the story of how this started and how
you met your partner on Allen and what he brings
to compass. Yeah. Absolutely, I UM, with my background actually
grounded in real estate. My mom has been an agent
my entire life, the first half as a life insurance
agent actually and in the second half as a real
(01:51):
estate agent. And so I had seen her to move
from firm to firm to firm, hoping that you would
get the support tools to realize her dreams as an
agent and really as an entrepreneur running a small business.
She never got that. And so that's going to where
I saw the opportunity to build a company that can
(02:12):
improve the quality of life and the potential career potential
of agents UH in the country. And when I was
at Goldman SAX, I saw how there were thousands of
people on the technology seeing their building tools for bankers
and traders. I just thought, if we can we can
(02:32):
create a company that can take those kinds of resources
and build not for bankers and trade as a build
for real estate agents. UM, you know what that could
do for people like my mom. And Ory alone has
sold one company to Google, another company to Twitter, UH.
And I met him when I was working in the
White House, UH, and we just became friends over the years,
(02:52):
and that's the person that I reached out to to
start the company. When you survey the agents, what were
the main concerns that was holding them back from better efficiency?
So the average agent in the country logs into leven
companies to do their job every day. So there are
(03:13):
over five hundred software providers that are selling to agents
given parts of the real estate experience, from valuation tools,
to scheduling open houses, to UM taking open house sign ons,
um search, CRMs, and the list goes on and on.
Marketing materials people lose with as personal websites. There's so
(03:35):
much part. There's so much of the actual workflow of
an agent. And the main problem that UH that I
heard over the years when surveying agents is has link
take all this friction and fragmentation and create simplicity and harmony,
bring everything into one end to end platform. You said
(03:56):
that what really differentiated you from most other real estate
companies was the diverse experiences of your colleagues. Is this
why you think your initial fundraising was so successful in
providing something that investors really like. Yes, So, from an
(04:17):
investor perspective, real estates the largest segment of the global economy.
The value of real estate in the world is two
and seventeen trillion dollars. That's four times the size of
every public company combined. Um. It literally real estate defines
are are It's like the economics of our physical space,
and it defines where we work in with and so
(04:39):
it's it's the largest legacy business that has not been
improved by software. So I think investors um UH had
a sense that there's there are very few industries left
that haven't really been improved, healthcare being one, real estate
another which is a larger one. And I think they
were also inspired by that we were building for agents,
(05:03):
were seeing them as the customer, where all the other
major software companies in real estates UH, we're really viewing
agents as the key stakeholder in the business. Could you
give us some examples of a problem that you are
technology solve for agents. I would say a problem that
(05:26):
it solves is suit marketing. For one, agents are likely
the largest group of marketers in the country. They're sending
digital newsletters, postcards, mailers, um social media every single day
of marketing themselves as Hey, I'm a great agent, work
with me in marketing their properties on behalf of their
(05:47):
sellers to sell the properties. Um. We created something called
Marketing Center, which is a tool that allows them to
have the power of a professional designer using Photoshop, but
in the palm their hands. Instead of having to hire
designers to do that work for them, they're able to
do their empowered to do it themselves through through our
(06:09):
same end to end platform which connects to all of
the liftings and connects to their theorem as well. Is
the way that Compass deals with agents and commissions significantly
different from other brokerage firms. Our approach to commission splits
is we we go into a market and we take
(06:30):
the same schedule as one of the largest two players,
and then we give a small incentive to the earliest
people that come on. Now, you just acquired a company
called Contactually, a one based CRM platform. What is this
and how does it add value to Compass. Contactually was
(06:52):
the most popular real estate CRM in the country. And
the goal of the CRUM is it helps an entrepreneur
wake up in the morning and know who to call
UM and UH and so we It's kind of think
about as the heart of of an agent's business because
(07:14):
all their contexts are there UM their buyers and their sellers,
and it tells them based off the information that's happening,
whether it could be their birthday, whether it could be
their anniversary or buying their home, whether it could be
that they're searching the site to reach out their clients
with a certain type of communication that helps build the
(07:36):
relationship and help their client needs. We've asked about what
Compass offers agents, but why should a home buyer choose Compass?
But the home buyers should choose Compass because we have
the best agents. Uh. And so what it means by
that is UM we give more service support, technology marking
(07:59):
to agents, which allows the best agents to come to Compass.
And really, when you're working when when you're working with
an agent, they're doing the majority of the work. When
they're the small business owner, we're just an infrastructure of
supportive platform to allow them to have more time to
better serve their clients. So think about it in a
different way is to say the same thing. If of
(08:22):
the average ages time has been on non core administrative
and arts and craft tasks, UM at Compass, we give
them more of that time back with our support and
tools so they can better serve their clients, and how
does the agent compensate you. So they compensate us the
same as they do in in each of the major markets.
(08:46):
And so that's basically a commission split where percentage that
goes to the company and a percentage percentage of that
goes to the agent. Would you say that Compass has
become a traditional real estate brokerage but with cut edge
tech and has that evolved in a different way than
you originally imagined. Yeah. When we first started, we were, uh,
(09:09):
we were a small little company in New York City
focused more on rental agents UM. And so you know,
we we've definitely grown much further than I have respected.
And we started this company working out of the Chelsea
Piers UM facility where UM it was actually a New
(09:29):
York Law and Order UH police station STEP and so
we've definitely now we have over two hundred options in
the country where UM we're in the top twenty major
markets in the country. You have over ten thousand agents
in the country and we're number you know, one or
two in the majority of the markets were in and
(09:51):
so you know, it's definitely we're well beyond whatever I
thought was possible. UM and It's really reflection that when
you have, when you bring great people around you that
have big dreams and a lot of passion, they're going
to build a future above and beyond what, you know,
what anyone person would expect. How do you keep the
top agents? Won't there always be a new toy someplace
(10:16):
else for them to pursue. Yeah, Unfortunately, the real estate
brokerage model is in a kind of it's a a
Netflix Verst Blockbuster moment. The brokerage firms haven't improved in
any meaningful way for many years. She asked the average agent,
what do you have today from your brokerage firm that
you didn't have a year ago. They usually always say nothing.
(10:40):
It's the same thing the year after. After you think
about the cable UM and so, uh, brokesh terms aren't
aren't aren't building technology there? If they're doing anything to
pay a third party provider to integrate different components of
other people's technology, um and so we aren't seeing our
(11:02):
agents leave Compass in any meaningful way to go to
to other companies less. Last year, only one percent of
agents less Compass and so a one percent turn. We
feel pretty good about you've added technology to the most
basic marketing tool before sales. Sign How does that work?
(11:25):
So we have a real estate sign um that is
um that lights up at night. And the way that
we thought about it is real estate signs have not
been improved or innovated upon you over forty years. It's
the exact same thing. And again a reflection at the
brokerage firm has been okay with okay, the good is
good enough. And so you know, we took an approach
(11:47):
that if we're going to redesign a sign becoming like Apple,
we're going to create a sign, what would it look like?
And so we have very different materials, metal, different shows.
It glows at night when you it connects to iPhone
downwards and captures data like how many people are walking by,
(12:07):
how many iPhones connected to it? When iPhone connects you
to get proprietary information around the listing and sort of again,
every part of what real estate is. We want to
get better and better every year. If a real estate
broker decides to change the way he operates or she operates, uh,
(12:29):
would he see anything different in coming to compass in
terms of his compensation for selling a home. Yeah, So
the real estate broker comes to Compass they have. They
charged the same commission to their clients that they would
at another company, So there's no difference in terms of compensation,
(12:53):
but apparently there's a big difference in terms of services
to that real state agent exactly. So agent and Compass
when they got a seller, they're able to offer things
like Compass Countires, which offers staging, landscaping, roofing, flooring, cosmetic
(13:15):
repair services to the sellers. Is Compass involved in commercial
real estate as well as residential? We're yes, you're in
commercial as well. We've focused more on residential, but we're
also in commercial. Are other large companies such as Carcran
doing anything to compete against Compass? You know, there are
(13:38):
a lot of good brookrages out there that are all
working hard to help their agents. You have the best
quality of life and support. But I do believe that
our ability to raise over a billion dollars and to
hire people from inside and outside of real estate to
some of the best companies um in the country, from
(14:01):
places like Apple, Pixar, common Ass, Loreale, the moment Google,
I think it allowed us to give a level of
service to our agents and their customers that other companies
aren't able to preside. How did you go about raising
over a billion dollars in each round? It was fairly
straightforward and none of the rounds took more than a
(14:22):
few months. Uh. I believe our results of being able
to grow at triple digit growth on triple digit revenue,
So a hundred million dollar plus revenue with a hundred
percent plus growth, that's you know, they're probably less than
twenty companies in the country that have grown at that rate. Um,
and so I think I think there are there are
(14:43):
a lot of investors that want to grow. They want
to invest in companies that can build the future of
their industry, build a platform for an industriere's largess real
estate and so um it's been it's been pretty straightforward
to to raise the money raised over the years. Did
you have an investment bank or do the rais or
did you do it on your own? We've done all
the rasors on our own. Based on your experience in
(15:06):
scaling your business, what advice would you give other entrepreneurs
who are deciding when to scale their business. I would
wait to scale your business until you have product market federals.
You don't know if you're scaling the right business. UM.
And a tell sign is does the customer? Does a
(15:26):
customer love what you have? Um? And until a customer
really loves what you have, I wouldn't scale it. And
I don't think it's good enough for a customer to
like what you have because that's not meaningful enough. And
say this world and really they really need to love
what you do. When you think about Instagram, people love
it so much they're looking at all the time. People
need to really love your product. It's reported that you
(15:49):
have a plan for the company. What is that and
how would you achieve the goal? Yeah, our our vision
is to realize in the top twenty. It is by
the end of UM. We're already there in Washington, d C.
With twenty market share. We're there in uh, San Francisco
(16:11):
and and sort of m Valley, UM where there in
a number of the markets were in. So we just
got to keep doing what we're doing, which is focus
on given agents the best service and truly that the
real ambition is to build a company that improves agent
life so much they can't imagine litten about it. And
you know, we're not there, that will probably never be
(16:33):
there because I want to always get better and better
and better. But if we can focus on our customer
in a world where they've never been a company with
a immendous amount of resources, whether Golden Google, Chevron, General Electric,
whatever company you you can think of, it's never been
a company like GUS look at agents like a customer. Uh.
And so that's that's where we have to continue to
(16:54):
focus and differendships. If there's a real estate broker, let's
say in Stewart, Florida, working for a local firm, would
he be able to sign on to Compass and work
for them as comfortably and profitably as working for the
(17:16):
local Stewart, Florida firm. Yes, Uh, she or he was
definitely be able to work at Compass as easily and
possibly as as another firm. Um. There are some firms
in the event that are discount firms where they charge
(17:36):
the agents nothing. So we're not that. But but for
the premier firms, we always charged at the market rate,
and so here they would be able they would have
that same um, they have the same profile. What's your
vision for what more is possible in changing the real
estate industry and do you have plans to move on
to other industries that need change. We wanted to realize
(18:00):
the greatest real estate dream of the last twenty five years,
which is one stop shopping, not just a place where
consumers can come in search, but where everything is in
one platform. Mortgage, title, insurance, escrow, inspectors, movement services, everything
in one place. Create harmony in simplicity and the real
(18:23):
estate process. And this is an industry full of friction
and fragmentation. You want to bring things together and create
the implicity for both the consumer and the agent. How
does the overall economy look to you right now? I
think the economy is stable. I don't see anything in
the mirror term that's going to dramatically improved or create
(18:47):
know um, intimistic and trouble in the economy. And there's
nothing that received through UH in real estate that creates
an indication of that as well. You wrote a piece
all startups need leaders not bosses. Could you explain what
you mean and how does this guide you as a leader.
(19:07):
I think the most talented people out there, which you
obviously want to bring to your company and to do
great things, you know, they they don't want to be
told what to do. I think I think bosses just
tell people what to do. I think leaders have to
do three things. That the ground the company in reality.
They have the revision of where you want to go,
(19:30):
and then create a path to that vision. And then
you know, then allow people to make that all the reality.
You said you filled your office with entrepreneurs. What do
you look what do you look for? And how do
you ascertain whether someone is entrepreneurial? And so we have
(19:51):
a couple of entrepreneurship principles. First, at the dream big people.
Your your ambition is to count your potential. So you
have to really big people that move fast, not people
that are in the comet room and feel good after
two hours of being on a white board. People that
actually want to make their their ideas of reality and
(20:11):
move fast. And people that learn from reality, learn from others.
And people that are solutions driven, that collaborate that ego,
that obsessed about opportunity, and I think you obsessed about
what you love and and that's a good thing. So
if you're not obsessed about your work and you don't
love it enough to be great at it, people that
maximize their strengths and focus. Now some try and make
(20:32):
weaknesses that have really focus on their strengths and and
surround them of those people that offset their weaknesses. And
lastly people that bounce back the passion. One of the
great things about agents is they're the kinds of people
that can can have, you know, significant challenges and still
move forward. Think about the kind of person that can
knock on ten doors, gets it known to every single
(20:53):
one of them, and still move forward to the leven.
But those are the eight entreprenurship principles of the company.
You say that American needs You, an organization that you
founded in two thousand and nine has been able to
achieve great things. What what are some of the things
that American Needs You? Is all about Ten years ago.
(21:15):
I started a nonprofit called an America Needs You. It's
now in four different states and serve students who are
first in the family to go to college and below
the pobby line. It gives them cleer development, college support
in two summer internships, um and you know, we have
(21:36):
meant one on one mentorship with each one of them
and we meet every two to three weeks over the
course of the treater period. Eventually, you say that American
needs You could wade into policy to have a greater impact.
What would you want to advocate for That's a great question.
It's always been my dream. Now I'd like to dream
(21:57):
big is that the alumni of American Needs view UM
students in the mentors. You can become an advocacy group.
And what I would love for them to be able
to focus on us altogether is on education. Education has
been the most important pathway to realizing potential in this
country and beyond. And I think a lot of areas
(22:18):
were I'm doing from millennials age five to thirty four,
homeownership is eight percent lower than Baby boomers at that age.
Is student debt's still hanging over this market? Yes, student
debt is increasingly Involvement is probably you know, one of
the one of the big bubbles that were weird ugly
(22:39):
head and the decades to come. What are you saying
with this group but me personally, you know, we're not
seeing as much because you know, the buyers at homes
tend to be an older UM. But just from what
you know, what I read about the in the world
around us, there there there may not be enough UM
(23:00):
post college to cover the student debt that's realizing college
as a country. Now, the FED is about to act
in terms of interest rates. Do you have any hopes
for what they do? Do you care about their next move? Absolutely?
Hopefully they are flat abound, So it's always better for
(23:21):
real things, right, All tech startups worry about a newer
technology making their business obsolete overnight. Do you hope that
your tech hub keeps you on the leading edge? Yeah? Absolutely.
I believe a check will she doesn't leave an edge
because it's it's uniquely serving the agents um and I
(23:43):
believe whoever creates the most value for agents in this
country will create the platform for real estate in this country.
Now compasses launching a technology campus in Seattle, hiring a
hundred engineers, What are these engineer is going to be doing?
What do you have planned? Yea, So we were still
(24:06):
valuing the right part of the platform for them to
focus on. But it may be transaction management and the
actor market. So those some most probably we talked about earlier,
mortgage title insurance, ESCRO movements is going beyond just the
transaction to what happens afterwards, and you need a hundred
engineers to do that work. You know, we already have
(24:29):
over two hundred people on the product engineering team. In
uh in the company, and you know, we would like
to end the year with around four hundred. Have you
had any challenges that you didn't expect. I had a
lot of challenges that I'd expect, but I'd say the
one that I didn't fully appreciate is the importance of culture. UM.
(24:53):
And I've obviously seen it in my nonprofit life, where
it's encounted American medio empathy, Americans wanting states reasonally do
not profits. And I've heard people talk about in the
companies I worked in before whether the kings or blemis
but culture really is everything UM and somebody can put
(25:17):
not focus on As a company. He worked at Mackenzie
Goldman Sachs and as a fellow in the White House.
He founded America Needs You, a nonprofit that provides career
development and membership to first generation college students, and in
two thousand and twelve, he co founded real estate technology
(25:40):
startup Compass, which was recently valued at four point four
billion dollars. Robert Revkin, thank you for joining us. By
the way, if you have comments about the program or
suggestions for topics, please email me at a Closer Look
at Bloomberg dot net. That's a closer Look one word
(26:04):
at Bloomberg dot Net and follow me on Twitter at
arthur Levitt one word. This is a closer look with
Arthur Levitt.
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