SoftBank-Backed Real Estate Broker Compass Hit by High-Level Exits

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As We Cos. tries to regroup after its CEO’s abrupt departure, another real-estate tech company backed by

SoftBank Group
Corp.

is contending with an exodus of top executives.

Announcing her departure Tuesday, Compass chief operating officer

Maelle Gavet

is the latest executive to leave the company during the past 18 months, in an exodus that includes the chief financial officer, chief marketing officer and chief technology officer.

The firm’s general counsel, head of product and chief people officer also recently exited. A Compass spokeswoman said the company had recently filled some of the vacant positions, including hiring CTO

Joseph Sirosh,

a former artificial-intelligence specialist at Microsoft.

A Compass spokeswoman called Ms. Gavet’s departure a mutual decision but declined to comment further.

The seven-year old New York-based brokerage is known for its slick digital listing platform and for wooing agents from rivals with stock options and some of the industry’s most generous commission splits. Fueled with $1.5 billion from SoftBank and other investors, Compass has gone on an acquisition spree and dangled the prospect of an initial public offering.

Compass is in a very different business than We, the shared office-space operator whose chief executive,

Adam Neumann,

stepped down this week and ceded control after the company delayed IPO plans. But both firms share backing from SoftBank’s Vision Fund, rapid growth and a mission to prove that they should be valued as tech companies rather than traditional real-estate companies.

“It’s unfortunate for [Compass] that these departures are happening at a time when they’re under increased scrutiny because of what’s happening with WeWork,” said

Clelia Warburg Peters,

co-founder of MetaProp, a real-estate tech startup accelerator and the president of brokerage Warburg Realty.

Strategic disagreements prompted some of the recent exits, say people familiar with the company. One faction at Compass has focused on investing on the technology side while another wants to prioritize growing traditional brokerage operations, these people said. Ms. Gavet belonged to the former camp, say people familiar with her thinking. She didn’t respond to a request for comment.

The Compass spokeswoman said the company has focused on technology growth, pointing to its 252 hires in product and engineering since the beginning of 2019, more than doubling that department’s size. Compass chief executive

Robert Reffkin

declined to comment on Ms. Gavet’s departure or the company’s recent turnover.

Compass CEO Robert Reffkin said earlier this year that near-term profitability isn’t a priority: ‘Investors now have an incredible long-term view—20, 30, 40 years.’


Photo:

Go Nakamura for The Wall Street Journal

Some analysts said the number of senior-level departures at Compass isn’t common for a company preparing an IPO.

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“Generally speaking, people join these companies in large part for the wealth creation that an IPO brings,” said

Jack Micenko,

a senior analyst at trading and tech firm Susquehanna International Group. “To the extent that anyone in a senior position at one of these startups leaves prior to an IPO, [it] is somewhat unusual.”

Venture capitalist and Compass investor

Todd Chaffee

said the number of executive exits wasn’t cause for alarm. “At this stage of the game, when you have so much growth, you’re going to want people to move fast. If they aren’t moving really fast, it’s kind of like, ‘Get out of the way,’” he said.

Still, some Compass investors viewed Ms. Gavet—a Paris native who held high-level positions at the Boston Consulting Group and Priceline Group—as a seasoned executive who could help shape the company’s vision.

The startup has a valuation of more than $6.4 billion, or about nine times the size of the market capitalization of

Realogy
,

a publicly traded company that owns the brokers Corcoran Group and Sotheby’s International Realty among other real estate brands.

Like We, Compass has sought to make a case that it is more of a tech startup than a real-estate company. The residential broker has long said it would develop an “end-to-end” technology platform to facilitate real-estate transactions, handling everything from searching for a property to securing title and home insurance. At one point, Compass touted its plans for an interactive sale sign illuminated by LED to make it visible on lawns at night.

“Compass is just Realogy with better branding,” said

Mike DelPrete,

a scholar in residence on real-estate technology at the University of Colorado Boulder.

Mr. Reffkin has said that near-term profitability isn’t a priority. “Investors now have an incredible long-term view—20, 30, 40 years…They’re saying, ‘Who can build something that people love?’” he said in an April interview with The Wall Street Journal.

In that same interview, Ms. Gavet said the company didn’t have a clear strategy to monetize the business. “We just know that there’s definitely going to be a business model behind these things given how much money is in this industry,” she said.

Mr. DelPrete said the tumult at We is likely to raise scrutiny on Compass by SoftBank and other investors.

“It’s just going to put increased pressure and increased scrutiny on profitability and a viable business model,” he said.

Compass executives said their company shares few meaningful similarities with We. While it has spent heavily on technology, Compass has many profitable local brokerage operations, said

Jeff Barnett,

a regional office manager for Compass.

“The only reason we’re compared to [We] is because of SoftBank,” Mr. Barnett said.

Corrections & Amplifications
An earlier version of this article incorrectly stated that Compass is backed by $1.5 billion from SoftBank. That total funding comes from a number of sources including SoftBank. (Sept. 25, 2019)

Write to Katherine Clarke at [email protected] and Laura Kusisto at [email protected]

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