How An Israeli-Founded Tech Startup Became A $2B US Property Giant
In just six short years, a property tech company founded by an Israeli entrepreneur went from a seed funding round of $8 million to being valued at over $2.2 billion, after receiving an investment last month of $450 million from one of the world’s leading funds, Japan-based Softbank.
Compass, founded in 2012 in New York by Israeli-born Ori Allon, has been reshaping the real estate market in the United States with its algorithm-based platform that aims to better the home-buying process, pairing it with the expertise of top agents in the industry, which the company is said to be luring with significant signing bonuses. Compass has over 2,000 agents working for the company in 40 offices across 13 American cities including the Big Apple, Chicago, Washington, Miami, Los Angeles, and San Francisco.
Now, Compass is setting its sights on the world. Following Softbank’s $450 million investment, which came weeks after Compass picked up $100 million from Fidelity Investments, Allon says the company wants to take its model combining technology and human guidance globally.
“We realized that to hit the goal of where we want to be in the next two to three years — Compass everywhere, in every major city worldwide — we needed another partner, and that is the vision Softbank is aligned with,” Allon told TechCrunch last month.
“Compass’s goal is to become the biggest real estate company in the world,” he told Israel’s Hadashot TV News in December.
From the ‘City of Gold’ to the ‘city that never sleeps’
Compass’s meteoric rise started in Jerusalem, where Allon, now 37, was born and raised. After completing mandatory service in the Israeli military, Allon went off to study in Australia where he earned a PhD in computer science from the University of New South Wales in Sydney. Over the course of his thesis work, Allon developed the search algorithm Orion, acquired by Google in 2006.
Photoshoot at the Compass HQ office on 5th Avenue, New York City pic.twitter.com/Eak9Xq1UBs
— Ori Allon (@OriAllon) December 26, 2017
After working for Google for roughly 4 years where Allon led a search quality team that integrated the Orion technology and algorithms with the Google search engine, Allon founded the social analytics company Julpan, which Twitter scooped up in 2011. Allon then went on to become the director of engineering at Twitter’s New York offices before leaving to create Compass with Robert Reffkin, a former Goldman Sachs executive and White House aide, who serves as the company’s CEO. Allon is its executive chairman.
Allon told Israeli TV last month that, “After selling off two companies, I felt comfortable enough to say, now I’m founding a company and I’m not selling it.” He refused to respond to a question about whether he’s received offers to purchase the company, saying “even if we did, we said no.”
Not just a tech startup
Allon appears to want to hold on to Compass, at least for now, because he views the company’s role in the market as a mission and the technology behind it as a calling.
“The most significant purchase in a person’s life is real estate,” he told Israel’s business daily The Marker last month, adding that Compass’s goal was to “give people the right information to make [these] decisions.”
In a 2012 TechCrunch interview, Allon said that for years he’d been “focused on improving search engines and real-time search, but making it embeddable in daily life, to actually improve our lives, is important for me.”
Compass puts a premium on user experience, giving clients and potential clients an aesthetically pleasing platform to search for rentals and purchases, combining striking street and architecture photography (it was dubbed the “pinterest of real estate by Forbes”) with well-written neighborhood guides – complete with information about schools, commute times, eateries and drinking holes and a “vibe” section.
Compass president Leonard Steinberg told Forbes last year that Compass is the “real estate industry’s answer to the modern way people like to shop. Today, everything is about curation and personalization. With that in mind, we set out to build an intuitive and visually compelling way for clients and consumers to search for a home and interact with our agents.”
“We want to teach people [wanting to sell] about the value of their homes,” Allon said in the interview to Hadashot TV, adding that surrounding deals in the same street or neighborhood directly affect home value. “People can be a lot smarter on when to sell, on timing,” he said, explaining that Compass’s algorithm helps with all of those aspects.
And the recruitment of top talent injects Compass’s database with prime inventory, as well as provides them with the tools for faster-paced transactions. “Compass agents can perform key tasks (like generating comps for their clients) in a few seconds when it used to take them a couple of days,” Todd Chaffee, a Compass board member and a general partner at a venture capital firm, told Bloomberg last month.
And investors caught on quickly. After Softbank’s announcement, a senior investment professional at the firm, Justin Wilson, told TechCrunch, “Real estate is a huge asset class, but the sector has been relatively untouched by technology and remains inefficient and fragmented.”
“Compass is building a differentiated, end-to-end tech platform that aggregates across diverse data streams to support agents and homebuyers through the entire process, well beyond the initial home search. With disruptive technology and unique data advantages, Compass is well-positioned for future growth in a sector that represents trillions in transaction volume,” he added.
By the end of 2017, Compass was said to hit some “16,000 transactions and more than $14 billion in sales… as well as more than $350 million in revenue,” TechCrunch reported.
And Allon’s personal wealth is valued at some $400 million, according to the Israeli TV report.
Property and professional sports
While Allon lives and works in New York, his links to Israel remain strong.
In the Jewish state, he’s not just known as a tech entrepreneur. He’s also the (part) owner and president of the basketball team Hapoel Jerusalem and regularly features in the sports news cycle. His social media is peppered with references to the team and its recent championship titles and photos of fans and stadiums.
In an interview this month with Israeli business daily Globes, which named him among its “People of the Year” for 2017, Allon speaks proudly of the team and its future prospects, and fondly of his childhood memories of Jerusalem and growing up in Israel in general.
Although his life is in New York — where he recently posted a photo of himself with the major of the city of his birth, Jerusalem Mayor Nir Barkat, and the former mayor of his adoptive city, Michael Bloomberg — Allon doesn’t rule out becoming more active in the Israeli sphere.
“If I feel that I have a desire to solve a problem or try to have influence over something in Israel, I’ll do it in Israel,” he said.
But right now, Allon appears focused on Compass and how to reach the world.
“When you’re a painter, you want as many people to see your creation. I do this [creation] through technology,” he told Globes.