Urban Compass, a New York-based real estate site which matches buyers with brokers, has raised $40 million in venture financing, as it looks to expand to new regions.
Investors include American Express CEO Kenneth Chenault, Conde Nast parent Advance Publications and Salesforce CEO Marc Benioff.
This is the third round of funding for the housing service, raising a total of $73 million to date from an investor list that also includes Goldman Sachs (GS), Founders Fund, Thrive Capital and .406 Ventures. The company began raising capital in late 2012 and the Urban Compass service was launched last year.
“People will always need to rent or buy apartments,” Ori Allon, founder and executive chairman of Urban Compass, says. “We provide a service that you’re going to need no matter what.”
Competitors Trulia (TRLA) and Zillow (Z) have performed well in recent months, as prospective buyers and renters increasingly look at listings online. Trulia is up 13% year-to-date and Zillow has surged 55%.
“There’s been a fundamental shift in the manner in which consumers engage in real estate information -- mobile,” Bradley Safalow, analyst at PAA research, notes. “Everyone in tech looks at real estate as an industry that is ripe for disruption.”
Other entrants to the online real estate space include Redfin, Homesnap and Apartment List. Yet Urban Compass has a different business model than the ad-based services, focusing instead on pairing home seekers with brokers.
“Urban Compass is tackling a different side of the market versus the online portals by going after commission dollars, whereas the likes of Zillow, Trulia, and Move serve as platforms attracting advertising dollars,” James Cakmak, analyst at Telsey Group, says. “Meanwhile, Redfin, a more direct competitor to Urban Compass, is rapidly expanding into new markets following its latest capital raise last year."
The company is benefiting from a strong real estate environment in New York and looks to take advantage of a housing rebound in additional regions. Allon says that Urban Compass is evaluating an expansion that could include San Francisco, Chicago, Boston and Washington D.C.
Yet the company may run into growth problems, Safalow warns. “Real estate is a hyper local market so scaling nationally is cumbersome and complicated," he says. "No one knows Urban Compass outside of NYC” at the moment.
“The plan is to build a national brand that you can really trust.”
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