Compass laying off 1.6% of its staff

Technology

Compass, the nation’s fastest-growing real estate brokerage, is laying off 40 people, about 1.6% of its 2,500 full-time staff.

As layoffs go, it’s not a big one. But, that’s enough to spark rumors if you’re a proptech unicorn – meaning a real estate startup valued over $1 billion – and you’re backed by SoftBank, the lead investor in WeWork. That’s the proptech bad boy that imploded in a spectacular fashion on the verge of its $47 billion IPO last year.

“Compass is under a microscope right now because of the SoftBank-WeWork connection,” said Mike Delprete, a real estate tech strategist and scholar in residence at the University of Colorado. “For a company the size of Compass, laying off 40 people is not a big deal, but there’s a lot of scepticism around SoftBank investments, so it’s enough to make people think they smell blood in the water.”

Compass has made a splash in the last seven years, raising hundreds of millions of dollars from investors such as Fidelity and SoftBank while billing itself as the “first modern real estate platform.”

In late July, Compass announced it raised $370 million in a Series G funding round that included SoftBank and the Canada Pension Plan Investment Board. The investments valued the company at $6.4 billion and sparked speculation it was nearing an initial public offering.

“Compass is a company that has experienced massive growth in the last few years,” DelPrete said. That rapid growth is about the only thing it has in common with WeWork, a company that leased commercial real estate to sublet, he said.

The pace of Compass’ acquisitions slowed in 2019, according to a tally by DelPrete. In 2018, Compass bought 12 companies with 2,563 agents, while in 2019 it only bought 2 firms, with 1,604 agents, he said.

While the New York-based company declined to comment on the record, a person in management said it’s making fewer acquisitions because “organic agent growth” has taken over. Compass has about 15,000 real estate agents, 10 times the amount it had four years ago.

Compass was co-founded in 2012 by Ori Allon, who sold his previous startups to Google and Twitter, and Robert Reffkin, who rose through the ranks of Goldman Sachs to become chief of staff to the investment bank’s president.

The Compass layoffs were first reported by The Real Deal and Inman.
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