Venture capitalist Josh Kopelman has stated that he likes startups that shrink markets - “We love investing in technologies and business models that are able to shrink existing markets. If your company can take $5 of revenue from a competitor for every $1 you earn – let’s talk!”
And while he isn’t an investor in Seattle-based real estate startup Redfin, I’m pretty sure he likes their business model. The company is doing its best to completely remove real estate agents and brokers (and their absurd fees) from at least half of a home sale. If you use them when you buy a home, they reimburse 2/3 of the broker fee to you, keeping 1/3 for themselves.
60 Minutes covered the company last May, which led to a surge in business. CEO Glenn Kelman told me today that, since launching in February 2006, they’ve been involved in 1,500 transactions and have reimbursed $12 million to customers. The average refund is $10,000. The company had 2007 revenues of $5 million, he says.
They’ve just launched a new version of the website that includes more frequent MLS updates and the ability to group home sales by neighborhood and download the data. They are also providing deeper data on homes currently on the market as well as historical sales (they compete with a number of other startups in search, including Zillow, Trulia and Roost).
If you want to use Redfin, check first to make sure they cover your geographic area, which include the San Francisco/Bay Area, San Diego, Orange County, LA, Seattle, Washington DC/Baltimore, and Boston. Chicago is coming soon.
$5Million in Revenue last year ($50,000 net) against over $20Million in funding.
I don’t know how good they are selling houses, but they must be awesome at presentations to their investors.
“Sure, we are not making any money, and our business model is completely reliant on the fact that the industry we are saying we will change does not, actually, change (because then we would have no commission to refund). But hey, at least we’re big on TechCrunch!”
Realty or Reality? When any industry behaves like a cartel and spends more effort protecting the interest of the members with a blind regard to what the consumer is asking for…. their days are numbered. Trying to create value by hiding data in 2008 shows ignorance to the world we live in. Obstructing a free market rarely prospers.
This is not to say that I don’t think many realtors can add value but the industry should have done far more to reduce the cost of a transaction on its own. Over 6m transactions and yet it still costs 10’s of thousands of dollars per transaction. Name another industry that survives at that cost?
I applaud Redfin, Zillow and the others for trying to break the mold, They will appeal to sections of the market and offer more choice and that has to be a good thing for the industry overall.
To Paella: I think I cannot agree with you, that “Realtors are an increasingly unnecessary breed, as are most of the other middlemen in many other business areas.” As I´m a Toronto realtor too. In my opinion real estate agent can be very useful to people, who don´t have broad knowledge of real estate market. I always try to support my clients and receive positive feedback from them.
The sluttish foaming I raced over to the rash to clamp Cameron ting for me. Yes. Good. Lynn tweaked her epicurean cymbals and here slowly took off her bra.
@#3 Kerry - lol he more than likely lives in an apartment and hates anyone that makes more than $12 an hour.
In life you tend to get what you pay for. If you’re a redfin kind of person that wants to works with someone that really doesn’t do anything for you - go for it.
There will always be a place for professional real estate agents - like it or not.
Redfin is to real estate, like do-it-yourself online legal hotlines are to Attorneys or black market Viagra vendors are to pharmacies. They are like locusts on earth.