For the inaugural ecosystem update, I won’t be posting trend information. All the employment data is new, so I have nothing to compare it to. But there’s no shortage of important changes in the past few months. COVID-19 has been a major factor. We’ve seen belt-tightening measures by tech-enabled brokerages.
Because this is the first report, I’ll highlight a few interesting findings. First is on geography. It was somewhat surprising how meaningful Dallas and San Francisco are. San Francisco is bolstered by DocuSign. But it's also the closest to a non-real estate company in my data set. Regardless, Opendoor, Movoto, Roofstock Unison, and ApartmentList all employ significant numbers. LA and Dallas round out the top 3. Both are bolstered by data/valuations and property management companies. Consumer companies Zillow Group, Redfin, and Constellation Real Estate Group aren’t big enough to get Seattle into the top tier.
When it comes to company count and a supportive startup ecosystem, New York is a standout after SF. But it lacks the number of $1B+ businesses in Texas, California, and Washington. The disconnect is likely because New York targets more nascent models. Modern brokerages and financing are still pretty small from an employment standpoint. But of the tech-enabled brokerages over half are based in NYC and Seattle. Ultimately, these companies do employ a lot of people, but many are agents.
From a category standpoint, it’s amazing how many companies help with leads of website building. Our list includes over 150 companies across both categories. These are often smaller, agency-type businesses with 20-50 employees. It speaks to how high-touch and customized branding and marketing has to be for agents. Conversely, closing software and property management are dominated by a few large incumbents.
COVID-19 devastated tech-enabled brokerages. They often have larger R&D and support staffs than traditional brokerages. This means that when things slow, the company still has to pay a large staff. Redfin laid off 7% of its staff, while eXp and Compass both made 15% cuts. Opendoor, the leading independent iBuyer, cut 35% of its team. In lending, Unison cut almost 50% of its staff. But refinancing is strong. Better.com is now hiring aggressively.
Home Captain acquired Redefy in March. This is maybe the first modern brokerage acquisition. And it may be the start of a trend. For Home Captain, this allows it to couple its mortgage referral services with end-to-end real estate offerings. Right now we're seeing many real estate brokerages push into ancillaries. But we may see more companies reliant on mortgage income go the other way.
Firepoint and Realvolve merged in February. They describe the combined value in their merger information page: “This technology is too critical to leave to chance — to leave in the hands of your broker, who in many cases isn’t looking for what’s best for you but simply checks a box to get it done.” It makes sense to start seeing independent SaaS providers merge. More brokerages are providing end-to-end platforms. This way companies that focus more on single areas like CRM or lead management can join forces.