Real estate startup Compass recently amassed a valuation north of $1B, but old-school brokers do not think it will stick.
The firm, along with others in the space, pitches itself as more of a software company that focuses on brokerages than a traditional real estate firm, the Wall Street Journal reports. It is not hard to understand brokers’ suspicion that an upstart could really be so valuable when the largest U.S. brokerage, Realogy Holdings, has a market value of $3.8B, as well as $3.3B of debt.
But firms including Goldman Sachs, Founders Fund and Wellington Management are increasingly pumping money into these real estate tech startups, helping them achieve lofty valuations. In order for them to stick, however, Compass and similar tech startups will have to prove they can deliver accordingly. Compass isn’t off to a bad start. Brokers who use its software earned an average 32% higher commission using its software last year than they had in 2015.
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