Compass S-1 (opens in new tab)

I have been house hunting lately and my agent works for Compass. The website experience kind of sucks. Horrible mobile experience, lots of UX glitches, it’s just annoying to use. In fact, half the time we are using StreetEasy to look at listings (they are a local competitor). Other than that, your buying experience is completely based on the quality of your agent and how well he can navigate your market. Not sure how Compass gets an edge there, but I will say my agent is great!

Compass is a real estate technology company that provides an online platform for buying, renting, and selling real estate assets.

https://www.compass.com

$270M loss on $3.7B in revenue. If they can get opex down, there's some serious money to be made and a lot of growth left here. In my neighborhood I'm seeing more and more houses go up for sale with Compass signs.

> On the date of this prospectus, Robert Reffkin, our founder, Chairman and Chief Executive Officer, will hold all of the shares of our Class C common stock

> Each share of Class A common stock is entitled to one vote per share. Each share of Class C common stock is entitled to 20 votes per share

I'm surprised no one has proposed laws trying too crack down on founders have super-control of their company through stock voting power shenanigans. For example, I hear a lot of critique of facebook due to absolute control from Zuck' and his voting control - the remaining shareholders are unable to vote him out or otherwise exert control

Edit: not explicitly saying its bad for business or anything like that, just surprised it hasn't been regulated away.

There's a bit of confusion in the comments a about the company. I had researched it a bit while interviewing there so I want to clarify although what I say will not be complete.

First compass is a real estate agency. They have agents (realtors) all over the country and the way they make money is through real estate commission.

To the extent that they have a public facing real estate search site akin to zillow, I believe the point is that it connects people with compass agents to represent them (whereas I think on zillow/trulia is just connects you to randos who paid for leads)

However the primary angle is that compass builds great tools for their agents. So the idea is that the tech makes the agents better at their jobs which in turn helps them service buyers and sellers better which in turn drives business.

I can see this angle make sense.

We are currently house shopping (not via a compass agent) and the agency's it system is clearly not that great for either us or the agent (eg when they send us listings it's not that smooth). Presumably would have been way better tech wise if we went w compass.

So that's the angle I think. Their tech and product people are solid, from my conversation. Lots of ex FAANG folks.

And finally there are comments below that don't understand why a realtor can charge the commission they do - it's because they are enabling you to navigate a high stakes, non commodity transaction and their local knowledge/network/etc matters. You could certainly try to do it yourself but unless you are going to dedicate full time to it you will just never buy anything except in a truly buyer's markets which we are not in.

I see Compass signs all over the place. What makes them interesting here? Are they doing something that every other large real estate company isn't also doing?

This is a company that helps realtors more than home buyers/sellers. The realtor business is a patchwork of messy solutions and mom/pop shops. Compass has brought many realtors into the modern age with managed business processes and a way to leverage all the tech behind managing home sales.

My realtor switched from his own excel sheets to their way of doing things and loves it.

A nice recent profile of Compass’ rise: https://marker.medium.com/how-compass-became-the-bane-of-rea...

Don’t miss the part where they do a huge, splashy, expensive electronic redesign of the classic realtor For Sale sign only to trash the whole concept.

I was a solo, technical founder on a true tech venture for real estate and property. There are many reasons why the 20th Century business model for real estate services persists today. Technology innovation cannot alone solve the challenges that entrepreneurs face in this domain. If you are currently working on solving these problems or have a strong interest in dedicating yourself to them, I'd like to connect. I've been building for several years and bring real tech assets to the table (secure, high performance systems written in Rust).

Does anyone have any familiarity with Compass platform? At first it seemed like the plan was to cut out a huge amount of busy work from agents' load and ultimately reduce the need to keep so many employed. Shaving away the cut paid out to agents would make a lot of sense. However, the story for the last year or so has been that they are simply spending a fortune buying up smaller companies and paying out higher-than-standard commissions.

Was the notion that their technology is their secret sauce abandoned? Did the platform just not meet the stated goals? The promise of their software seems gone and they look like a plain old real estate company trying to buy their way to market share with investment money.

I used a Compass agent when buying my condo but had no idea they were masquerading as a "tech" company. Their online presence was a lot better than other agencies in the area which is probably what sealed the deal for me, and FWIW the agent ended up being great.

The real estate industry is interesting since it's such an old practice and basically none of the old players (Keller Williams, Re Max, etc) capitalized on the tech boom from what I can see. Instead, companies like Zillow, Redfin, Trulia, and now Compass, all swooped in and established a presence. The MLS database is the last hurdle and it's inevitable that will solved in the next ten years IMO.

    Our business has experienced rapid growth. In 2019 and 2020, our revenue was $2.4 billion and $3.7 billion, respectively, representing a year-over-year increase of 56%. Our net losses were $388.0 million and $270.2 million in 2019 and 2020, respectively.

For a company that sells expensive inventories, this falls below my expectation. Compared to Coinbase, given my limited amount of money, I'd rather invest in Coinbase.

I’ve been looking at houses lately and I don’t understand why I can’t get a predicted score on a house. They know what I want by the filters. Why can’t I filter by houses within a 10 minute drive of a grocery store and a public library (two things that are important to me).

I guess it’s a case of why not built it yourself.

Any company that claims to provide in depth analytics and AI assistance as a value add but spends less than 10% of revenue on Research and Development is a concern.

Their spend decreasing from 6.4% in 2018, to 3.9% in 2020 seems anemic for any firm trying to put out high quality software.

Its a little silly how easily a company can categorize itself as a technology company. Many of the IPOs from the past two years suggests having a website and/or having an app doesn't just make you into a tech company (WeWork is a good example of this). Compass is no doubt eager to foster unreasonable expectations for growth that surpasses the business they're actually in (as real estate brokers) and prefer to imbued the magic pixie dust of "engineering" to somehow defy the forces of gravity with Google-like growth. Their argument that growth is a function of their "tech" vs. just old-school, everyday sales (with maybe a good dashboard/messaging app) is pretty weak.

On the surface it looks like a Redfin clone with a different color scheme.

Runs a lot faster than Zillow. Presumably because they haven't had time to add all of the analytics and tracking yet? or not as much load due to still being new(er)? Though it shows basically the exact same data as Zillow or Redfin.

Compass's business model is taking VC cash to pay above market rate for realtor labor in an attempt to capture market share purely through more "boots on the ground".

Whether this approach has any long-term value for shareholders seems dubious once the cash injections stop.