Redfin just raised $14.8 million, in a round led by Globespan Capital. The press release rattles off the stunning accomplishments that brought us to this pass: $6 billion in Redfin transactions, $85 million in savings to consumers, 97% customer satisfaction.
Michael Arrington broke the news, in a blog post with a photo of Redfin as a rabid squirrel. Which he intended as a compliment. It is a fact that his interview focused on the question, “Have you ever participated in an orgy?”
“Is this,” I asked breathlessly, “off the record?”
But the real question is: what’s the story behind the fundraising? Why did we raise more capital? Why Globespan?
Initially I didn’t want to do it. I once heard that Gene Simmons burst into an MTV playlist-meeting wearing roller skates and kneepads, asking what it would take to persuade bored executives to air a Kiss video. And this is how I’ve always thought about the fund-raising process too.
But fundraising isn’t such a riddle to us anymore because our business isn’t such a riddle anymore, to investors or to ourselves. We’re able to explain how it makes money now, and how it can make more money later. And so we told Globespan all about it, at first in an informal 2010 meeting with a managing director, Venky Ganesan.
It was then that Venky told us all about his firm’s experience with a progressive, local company we loved, Zipcar. And so we kept in touch.
Like many of us, Venky had started his own software company during the ‘90’s boom and somehow made it work through the bust. When pursuing Redfin, he used a term from a Cameron Crowe movie, “humble daily siege,” which I’ve since used on a lot of candidates Redfin is recruiting. He had a brilliant due diligence process, which relied heavily on contacting customers who’d left us Yelp reviews, good and bad. We like him a lot, and we’re glad he’s joining our Board.
Why did we raise more money? We didn’t need to, not desperately anyway. As of now, we’ve only spent a few hundred thousand of the $10 million we’d raised from Greylock in 2009. But in between, we dipped into the $10 million quite a bit because we’re a seasonal business, losing millions in winter and making millions in summer.
We emerge from our caves every spring a gaunt, scared little bear, so we decided it makes sense to put more huckleberries in the bank. And before our last round with Greylock, when we ran the business with only a few hundred thousand in the bank, we got really tight about every little risk. Like someone emerging from a crazy relationship, we hadn’t even noticed we’d gotten that way until we weren’t anymore.
We don’t want to get tight again. A company with less than 1% share of a $60 billion market can’t stop taking risks. As we’ve learned from Amazon, you have to keep making big bets, which can be capital-intensive when you’re in an operationally intensive business running at a larger scale. Our goal is thus to be as cheap as possible, even when that isn’t actually cheap.
We’ll use the money to keep expanding geographically, to offer buyers and sellers services we’ve never offered before, and to go deeper in R&D. Strap in Redfin! It’s going to be a wild ride.