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Compass focuses on growth

Questionable strategy has left the $4.4 billion brokerage overvalued without a clear monetization strategy

Robert Reffkin (Credit: Compass)

Compass continues to focus on questionable growth strategies instead of profits. The company’s COO Maelle Gavet told the WSJ, “We’re not yet at a stage where I have a very clear monetization strategy because we haven’t really talked about it.” This indicates that the fundraising prowess of Rob Reffkin has hampered the startup.

Absurd valuationReology owns Coldwell Banker, the Corcoran Group, and Sotheby’s International Realty, and has a market cap of $1.43 billion… SoftBank’s Vision Fund led Compass’ most recent round of funding at a whopping $4.4 billion valuation.

Interesting anecdote: SoftBank’s Masayoshi Son made a huge personal bet on bitcoin at the peak of the frenzy in late 2017, according to the WSJ. The investment came after the digital currency had already risen more than 10 fold that year to a peak of $19,783. He lost more than $130 million when he sold out after the cryptocurrency had plummeted in early 2018.

Still waiting: With unlimited resources, Compass has poached many brokers from competitors to accelerate growth. Simply incentivizing brokers to join by offering nice signing bonuses and higher commission splits is not disruptive. Consolidation is a nice strategy, but not a transformational one.

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