Inman Connect San Francisco 2016
August 2, 2016, Emeryville, USA
Inman Connect San Francisco 2016
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What We have Learned About Starting a Brokerage from Scratch
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About speakers

Glenn Kelman
CEO at Redfin
Robert Reffkin
Founder and CEO at Compass
Mauricio Umansky
Founder/CEO at The Agency RE

Glenn Kelman is Redfin’s CEO. Prior to joining Redfin, he was a co-founder of Plumtree Software, a Sequoia-backed, publicly traded company that created the enterprise portal software market. In his seven years at Plumtree, Kelman led engineering, marketing, product management and business development, and he also was responsible for financing and general operations in Plumtree’s early days. Prior to starting Plumtree, Kelman worked as one of the first employees at Stanford Technology Group, a Sequoia-backed start-up acquired by IBM. Kelman was raised in Seattle and was graduated from the University of California, Berkeley.

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Robert Reffkin is the Founder & CEO of Compass, a technology-driven real estate platform. Prior to Compass, Robert worked at Goldman Sachs as Chief of Staff to the President & COO following five years working in the firm's private equity arm. Prior to Goldman Sachs, he worked at Lazard and McKinsey & Company. In 2005, he was appointed as a White House Fellow to serve as special assistant to the Secretary of the Treasury. He was appointed by Mayor Bloomberg to serve on the NYC Workforce Investment Board and the NYC Board of Education, known as the Panel for Educational Policy. He also founded New York Needs You (the most time intensive career mentoring program in NYC) and founded Bronx Success Academy 1 elementary school. He received a B.A. and M.B.A. from Columbia University. He recently completed 50 marathons, one in each U.S. state, to raise $1 million for youth education and enrichment programs.

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As Chief Executive Officer of The Agency, Mauricio Umansky leads a team responsible for representing buyers and sellers internationally with many of the world’s most distinguished architectural estates, new luxury developments, and design-centric homes. He prides himself on his ability to stay involved in and facilitate all aspects of The Agency’s team, from in-office collaboration to creative marketing and sales techniques. Mauricio places a premium on customer service, drawing on more than 15 years of experience and out-of-the box thinking to ensure that his team provides the best customer experience in the business. He is constantly innovating and planning new ways for The Agency to grow – not only as a real estate brokerage, but as a cutting-edge, 21st century lifestyle company with a global presence.Mauricio is currently recognized by The Wall Street Journal as the #1 realtor in California by sales volume – and #3 in the entire United States. Mauricio specializes in selling and marketing luxury real estate worldwide. He co-founded The Agency in September 2011 with fellow agents Billy Rose and Blair Chang, and already their company has closed more than $1.5 billion in sales. Over the course of his career, Mauricio has personally orchestrated close to $2 billion in transactions.

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About the talk

Topic: Business


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I keep my people from food and I am in trouble but you three I think can do it. So how long you been in the business, you've been a realtor for a long time? I've been selling real estate for 19 years now. And your own company. I turned 5 years old on Labor Day. And Glenn. You are 10 years a decade a three and a half. So the newbie the old You are the middle child Mauricio. He said 10, I'm the old guy, he's the middle child. And you two guys never sold real estate, right? I sold real estate, I grew up in the business, my mom is an agent. So let's

kind of think when I love my audience cuz you've been out there in the field dealing with these guys, so please participate in this and maybe when do we get a yell out and we'll get a mic to you really quick. Turn up the lights because I think you can help me. I'm not out of gas yet. But I think this would be good to interact with people in the street that are selling real estate, but Robert three and a half years one of the, but I'll lump you two guys together you raised a pile of money. I think Mauricio. He probably started with a credit card.

Together how much have you raised? 135 million. And you've raised a little more than that. I'm more than that so together a quarter of a billion dollars and you're now and how many markets? 22 offices in eight regions and 85 85 and the word is you spend money like Banji meaning office space top producers. I mean, when is the I guess it seems like a lot of money but that could run out quickly with expensive leases right? Like I heard you got some fancy lease in Pasadena things like that great lease.

We're profitable in New York, DC profitable in Boston the way it works is 18 months after lunch and you become profitable 18 months. Is that your experience Glenn? We are also profitable in every market we launch. Usually, we're able to do that faster. Although at your stage. We took years to make a market profitable. So we just gotten better at doing it. I think they've been able to grow faster in each market that they go into by investing more. So the business depends on having a large number of real estate agents offset some of the cost of our software developers and that's the reason that

overall we're still not making money some Reese's a little bit of my foil here. We read some of your problems. Well, that's good news, but I did it this past the believability test that you can start a company and be profitable and 18 months. It sounds like Glenn took longer. What would be your question for guys that are capitalized like the versus how you get into the business completely difference. I mean we started with very little money. I take me to start with a million dollars and it was all our money and you know, we've been profitable Since day one I would think it took us about

six months to be profitable. We started off as very small Lisa's and we've grown from profits. We just continue to reinvest our own money. We invest our own profits and that's how we've grown. So, you know, I died I don't even understand or fathom how you know, if somebody can spend a hundred and thirty-five million dollars, but that's a lot of money to spend. What what are we missing for the broker at the tech companies understand one thing? I remember when I raise Venture money is some of you spend foolishly

not in parties, but you know as you get the business model right to testan and what about you guys? What is it go we invested in we call it research and development. But what that really means is Hayden ideas. And so what we learned early on a date ideas write the best ideas always come from the agents, then you can look at some the best appears right on software development is Best in Class marketing agencies that's in class and we take me out of the best of those ideas and try to institutionalize them across the country right next door and there is

a 40 ideas and I just go see which ones they just like the most men ubuildit the problem with his face. It is over 270 people or companies like that next door that are calling you every week saying you Programmatic Utah. So you've broken leader use it you don't know what to use. So we're trying to just build it all into one simple company get it there. If you come to Compass same idea. We spend most of our money on software development. Obviously, it also takes money to hire agency launched a market but that soon pays for itself my big bonus check

when we hire agents. We just pay a salary we pull you pay salary each faction bonuses, we pay for healthcare benefits and all these other call. You don't pay salaries know we or traditional model model. Yes, but that's all I can a real estate agent is going to be very profitable for us. So within a few months of launching a market that market generates prophets the longer-term challenges that we have to build a website that consumers want to use to search for a listing so that we can meet customers at Great scale. That's one of the premises of working

at Redfin is that you're going to Plenty of customers and it just takes plenty of software to build a site that can help us meet those customers. We believe that that's the best way to support our agents. We believe that when we spend on our property in order to be great at something and our our philosophy is that we are a small boutique firm with a large market share in a market that we go into. I don't have six hundred agents. I don't have eight hundred agents my Beverly Hills office at 75 my Brentwood office at 38, you know, and I know that

we were 17% of the LA market share last year in the last 12 months so, you know to be able to do that with a hundred and ten days and sza. Pretty solid a question or comment or a declarative statement. I love declarative statements. And do we have a mic if someone bring you on Mike? You don't know this guy. He is a bad guy on a planet. This is Peter viewer Brewer. He's an ambassador. He's wonderful day also sucks up to me, but it's a great. I love it. I love people that suck out there maybe. My name is

Georgie and I'm from Brisbane Australia. And I just wanted to say I was in Europe in the compass offices are in your office and the cold today was Fayetteville the knocking everything is just beautiful and yells really grateful for the experience to to be there and I'll just see you guys going wild All Over America. Thank you. I think I'll pay you later for that. Actually, all three of you do it in a different way and I go into those offices to and each of you share like two or three things you do. Is that clearly the Next Generation? It's all about the culture for the

agent that that I think is really important. Collaborative robots will rule as you know, very clear. We like to have fun. I think that's our people we really care about our agents. It's it's it's one really tight-knit family. And we all love each other. We all love hanging out. I mean, you know yesterday evening. There was a 7 p.m. And little ping pong tournament started in my office, you know, when we were there till 8:30 p.m. And it just it's I think that's really

what you know, what we do in terms of our culture is very expensive. But if I remember feeling down about real estate, which I do sometimes I'll drive to the other side of the tracks of every little thing going to Maurice's office and you can get a real uplift you can feel it. You know what it feels like a tech company that I've started less than a real estate company Glen. I mean any of the things that you said obviously Redfin has a strong sense of mission we want to make real estate better for the

consumer and we try to bring people together who really believe in that. I think the other distinguishing factor is just that it's team-based. So all the agents are employees and everyone is supported by a team. The transaction coordinators and folks who help out with chores because it's just hard real estate's a 24/7 job. People want to see Homes at weekends. They want to talk about offers at night and we're just trying to figure out a way to stop the on-demand economy without driving everybody crazy. And so striking that balance has been really important to a culture because we work hard

but we also need to figure out how I can take a day off in the summer before we get to you. I was with an old school Beverly Hills Cop produce a really smart guy when I first sat down I thought we had so much to say and he was a real critic are articulated a criticism of too many agents on a listing and everybody's on the listing this company. Company team. And he said one Ross putting the commission to who's got an incentive to work hard and the second thing you said who's accountable and I don't think that's

true and he really felt it. And he said that's a change their mind all excited about but I think it's kind of stupid. Maybe it's generational and maybe it's you know, non-collaborative. Maybe it doesn't mean team but it is important and if you make less maybe work less hard, how do you respond to that? You too? Cuz you're we do a lot of collaboration on these things and we share a lot of this thing. So we will put two three four agents on a particular listing list with outside agencies. We try to We believe that that becomes a little bit more difficult as you're saying from the

perspective of who's accountable. There are people all over La that we do it and we know how to do and we've done it for years and we continue to do those coolest things but we attempt not to and usually what we have is we have an account executive that is the lead person and then you got to know the other people that are that are helping the account executive such a blessing funeral creating a team for that particular listing and we can talk about this things that are 20 30 40 50 60 million dollars. Plenty of commissions that share their yeah. You just have to be clear about who's the top

dog. So there's an agent who's responsible for the customer success and then there are people who helped that agent. But if there are two people who are responsible for the customer success know, when is Zachary on a team here, you need a quarterback. You need a quarterback to need a wide receiver. You need to run it back. That's how you make it to him. Right famous basketball player from the bay are we lost the individual to do it differently and we support teams. I humbly feel like the

industry is going towards teams and I think individuals are becoming teams teams are becoming any brokerage is i that's just the trendline that they were seeing now, if you look at any advisory business in the world young bankers lawyers doctors, your doctor doesn't isn't doing her x-rays into just like you said teams work and we're really encouraging them. Question out here. Lie any question? Okay anybody feel in the air but I have a question and then I have a curious. I mean we're up here and I'm just curious,

you know, you guys hear that if you have an amazing technology company and I'm just curious how cuz I have my own views in my own philosophies in terms of what the real estate agent is to the real estate transaction and what technology does in order to for to enhance to the consumer and what you guys are doing in order to improve technology for the consumer guy. If you think you're going to sell someone's house just with technology. It's not going to work but it was a long time ago. I had to give that up and just decide that we're in the business of delivering great

customer service and the technology sometimes helps us do that. Every once in awhile, we screw up and it gets in the way but most agents are frustrated because they spend so much time looking for customers trolling different websites trying to get business and we think that if we can build sort of a similar approach to Robert and we can build a an integrated solution where you meet the customer or the way you serve the customer is supported by technology that we can do better that we can get people in the house has faster we can get listings more exposure. Will you can automate

the escrow process so that it's just less expensive we can deliver more value to the customer number 244 me the the only client of a brokerage firm is an agent and we'll brokerage firm is an infrastructure of the Ford for agent that's called her cuz you want to be around people you like supporting is traditional support. That's Marketing in the technology. So the one at four components, I was in a technology. I think it's making you smarter faster and look better because An Apple phone looks good experience and just taking all these different products that people have

input into one simple device and we're we're nowhere near that. Yeah, but that's the way it should be somewhere. We know how big they raise money. These guys are great. Storytellers. They are growing so fast insulation be wow, right to use Amazon. The first time in the package comes the same date. Wow Uber. Wow, Google. Wow, does not a buyer or seller enter developer agent that says wow about this entire experience. That's the opportunity that the challenge my only fear is this you come into all of your company's

they look cool. They really great really fantastic and I'm wild wild wild and then I try to buy that house next to me in West Hollywood and I just have a shity Experian and so somehow it's not getting from all your great stuff down to me is a consumer in my realtor retard know of no criticism all the people work hard, but it's just not very good at it all figured that back and out instead of the front and which is cool and whiskey and blah blah blah marketing bed help me with so I want to buy the damn house and pay the commission. I'm happy to pay the commission ultimately you need an agent

or the agent is the buyer's agent has a Cellar because they're everything basically a hundred percent to both. Right? So if you're Asian is overwhelmed with 270 products calling them every week if they're overwhelmed between the idea even last week tell me I have to look at whatsapp. If it look at my text messages my email and this other other other database to see who who wants what it so just too complicated John's too big for one individual right. Now. How do I believe whatever he was a really smart successful broker in Chicago is so I have to

look at your software. We look at your Your website and it's incredibly competitive and you open to the number of Market. They have two questions. I'm just curious if I and I think I've read that you've raised a little over two hundred million, correct? 6565. But if you find another 35 Seattle the same time. Okay. So my question is is that if you're opening in these markets and you're providing brokerage service and you're driving leads and paying salaries and Healthcare, have you ever

thought about eliminating the rebate or the discount so you can have more 40% more revenue or number two, when you look at the 7 billion dollar valuation is Zillow or the purchase price of Trulia and you have a phenomenal site that everybody loves using but they don't use your broker's my questions. If you ever thought of a pivoting and becoming a lead generator so you could have that same valuation and how do you communicate that to your investors? Why did you do that? Can you moderate tomorrow? We thought about eliminating the

refund for buyers, but mostly so we could give sellers a better deal. It turns out that the seller is more price-sensitive. And the reason we want to stay people money is that just part of our mission to do what the customer wants and when we talk to customers they want better service they want faster service, but they also want better value. And so the question we always ask ourselves when we invest in the services would we rather make that investment or would rather give the customer a lower fee? And sometimes we choose to make the investment and sometimes we choose to give the

customer lower fee but there's plenty of data we talked about it before whenever we change prices on the buy-side and and how to lower refund. It has not affected demand at all. And now we're in states that are anti rebate States. I like Oregon where we have the same levels of demand even though we don't refund any money, so it's a true test of our mission. As for the valuation of the portals in the valuation of Redfin, I think it's obviously easier with no disrespect to any of the portals but it's easier just to build an online presence than it is to scale a real-world

business with agents covering every neighborhood. It's taking us longer and we also have to acknowledge that it's lower margins that most of the commission is owed to the agent not to the software engineer or the CEO cuz the agent did most of the work so that limits our valuation but we tend to think that it's a larger opportunity. I'm 10 years into this we have less than 1% market share, but we grow at an almost constant rate every year which is why I keep coming back for more. Haha who else won the last question from the field as they say.

We're in the back of the computer. Yeah, y'all that word live stream of it all the people around the world watching really grateful is ton of people that we are plugged in right now watching it's a little difficult for the cameras and everything when we have someone from the audience tonight, maybe people say it's a disaster, but I'm sorry. I just want to tie into the DocuSign thing a little bit are any of you seeing problems where people are signing these contracts so quickly, they're not knowing what they're signing. They're not reading it and any consequences from from that

people signed documents. They didn't understand before we automated or electronic excited. Haha. Duration. Where do I initial? Yeah, I think people you know, there is no question people are signing but that's you know, where the real estate agent has to take the lead has to get on the phone and actually has to explain what the transaction looks like. I mean I can tell you that what we do is we send out just a quick briefing of you know, the important points on that contract so that email with the DocuSign has you know, the top 10 important point of contingency

Dateline to get super clear when your money goes hard when you're losing money when you need to remove contingencies, etcetera etcetera, and then we let them sign away. So you just started at celebrity Sports. Stop. Are you going after Marie? So he represents all these super famous people Sky. I hoped to partner with Mauricio. Right one will be partner as co-broker the double siding deals that their definition every Market more than competitors, right? So at the agent level into I think it's really

unique ways that we can partner with booty broker to switch. We're going to discuss hopefully at some point, but you represent celebrities, right? We represent a lot of athletes You know what the entire agency is. He is a everybody at the agency has the ability to represent celebrities and sports figures and everybody. We believe that we have 130 agents and every one of those hundred thirty agent is extremely well trained, they can represent everybody. So we don't have a sports and

entertainment division. We we had a guy that was with Robert over a compass that you know did sports and entertainment but we don't have a division. We actually think that that breaks up the company that breaks up some of the other agents and it actually creates a little bit of conflict. So hopefully, you know, you guys are able to figure that one out but they're everywhere I go you're poaching really good people. Is that true? So1 excited to hear in San Francisco. We're going to launch Francisco. Hopefully next couple months, but

my viewpoint is that Aiden's our clients, right? I don't I don't think apple or iPhone when they poach or when they when someone comes from Samsung that they feel like they're approaching your customers literally in every way right you you pay us and we give you support and I think the agents that end of it the team the boutique brokerage even some water is all they're all the teams and I think there's a greater opportunity to power the teams with what set of

services they want. Like Mauricio doesn't need to alter his break off and was he doesn't need marketing, but potentially I think he has to be frank. Maybe we can provide software and maybe we can but I think there's a lot of ways that we can all make Compass can partner with a broader community. Glen you are more kind of ground up people taking them, you know as opposed to going around and trying to NAB other top producer it in my right is a different recruiting strategy insurance company industry and half of our agents go through an apprenticeship. We measured how happy our customers are

with each and it's almost exactly the same but it is a long apprenticeship. You have to start as a transaction coordinator when associate agent who my contractor but it's just been a long process of understanding how to train someone what tools to give that person what traits to look for. I just because you can't grow as a brokerage purely by hiring from other brokerages. I don't know of a brokerage that can do that, especially when I think we are trying to work with younger customers and we need younger agents not a twenty-one-year-old necessarily but Or maybe someone in a map

timegrapher. Keep up the good work and keep innovating congrats on your success. Thanks for coming here Mauricio. Thanks for stepping in at the last moment. I'll always love having you on the stage and you guys are just really doing a great job. I'm sure there's some holes and what you're doing, but who doesn't have holes join me in thanking these gentlemen, and thank Lee Brown.

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