Deals & Deal Makers Online Real-Estate Firm Redfin To Announce Venture Funding
May 31, 2006 – Redfin Corp., a company that helps people buy homes online without a typical real-estate agent, is expected to announce that it has raised $8 million from venture-capital investors and is expanding its services from its home base of Seattle into California.
The company’s backers include Vulcan Capital, the Seattle private-investment group of Paul Allen’s Vulcan Inc., as well as BEV Capital of Stamford, Conn. and Hillman Co., a Pittsburgh investment company. Seattle’s Madrona Venture Group, which invested $750,000 in Redfin last year, also took part in the financing.
Redfin is the latest real-estate start-up to make a splash on the Internet and attract attention from investors: Earlier this year, the former chief executive of online travel company Expedia Inc., Richard Barton, helped launch Zillow.com, a high-profile Web site that estimates the value of homes and provides other information, such as historical sales prices. The Seattle company has raised $32 million in venture capital.
Chicago’s BuySide Realty Inc., a competitor to Redfin, launched its Web site in April, though it hasn’t yet raised venture capital, said Joseph Fox, co-chief executive.
Some venture capitalists say they are eager to fund such companies because real estate is a market ripe for cost-cutting through the Internet. BuySide was started by the same two brothers who founded discount stockbroker Web Street Securities in 1996.
Many consumers start their home searches on the Internet these days, doing plenty of legwork by themselves, and are frustrated that real-estate agents continue to earn high commissions, says Paul Goodrich, a managing director with Madrona who also serves as Redfin’s chairman.
Redfin relies on prospective homebuyers to call listing agents or sellers directly to set up appointments to view homes.
When Redfin users decide to make an offer on a house, they draft an offer online. Later, a Redfin agent who works in a local call center deals with the seller and serves as a go-between for the remainder of the negotiations. Redfin rebates two-thirds of the commission it receives for representing a home buyer.