After raising $400 million in September in a round that valued it at $4.4 billion, real estate startup Compass is making an acquisition to help it double down on growth: it is acquiring a portion of Spring, the mobile-first fashion shopping app that has raised more than $100 million since 2014, to work on parts of Compass’s AI-based real estate platform, which provides a marketplace to post properties for sale and rental across the US and soon other countries.
Compass and Spring are not disclosing the financial terms of this deal. When Spring last raised money in May 2017 — $65 million led by Fidelity — it was valued at nearly $152 million, according to PitchBook.
Compass is just one of Spring’s buyers. At the same time, we have learned that the rest of Spring’s assets will be going to another buyer, Shoprunner, the Alibaba-backed shopping app that has ambitions to take on Amazon and recently raised $40 million to do it.
There was an overlap of technical people between the two e-commerce companies, part of the reason why Spring was split up in the acquisition process. Kate has more here on ShopRunner’s latest fundraise and acquisition of Spring.
Now the thinking is that the kind of mechanics that the team was able to build to power Spring can be used to good effect at Compass.
It is taking on an undisclosed element of the business (enough that Compass was clear to describe this a ‘strategic acquisition’), and key staff including Spring CTO Satwik Seshasai, director of engineering Jim Grandpre, and some 20 others from its engineering team.
“Spring was founded on the belief that consumers were looking for a better online shopping experience, a single destination where they could find all their favorite brands,” said Seshasai in a statement. “In a similar way, Compass is embracing the digital future and revolutionizing a legacy industry with agent satisfaction at its focus. I am thrilled to help Compass grow its technology platform as it continues to be a leading disruptor in the real estate industry.”
Seshasai will become Compass’s senior director of growth infrastructure, and Compass said that the team it’s acquiring will be deployed alongside Compass’s existing team of engineers and other areas of the business “to help accelerate its technology roadmap and develop technologies that enhance the agent experience.” They will work under and with Compass’s VP of engineering, Priyendra Deshwal, and head of product, Eytan Seidman, and an existing team of 120+ technical staff.
Compass has built itself to become a very slick site focussing on high-end properties and customers, but under the surface it is a well-oiled tech beast. It was co-founded by ex-banker Robert Reffkin and Ori Allon, and Allon is an engineering whiz who had built and sold search businesses to Google and then Twitter (respectively helping each of them build foundational search algorithms).
“The team at Spring built a service-oriented brand and technology platform that attracted 2,000 of today’s top retailers,” said Ori Allon, Compass Founder, and Executive Chairman, in a statement. “At Compass, we believe in investing in top talent which is why we welcome the opportunity to bring members of the Spring team on board. Our new Compass colleagues will execute against and innovate on ways to build the end-to-end real estate platform with real-time insights and technologies that will redefine the industry.”
When Spring first sprouted up in 2014 — co-founded by brothers Alan and David Tisch — many thought its mobile-only approach would help it steal a march on the world of online fashion. It’s aim was clear: to provide a marketplace for labels and shops that finally made buying and checking out from the virtual store as easy as swiping right. Indeed, we described it at the time as the “Instagram of shopping.”
However, over time it appeared to expand what it was doing in an effort to scale — adding a web site and working with retailers as well — which diluted its pitch to brands that had hoped for a more direct relationship with consumers. And on top of that, you could argue that Instagram itself has taken on the task of becoming the “Instagram of shopping.”
The Shoprunner part of the Spring deal has been rumored for the last month. A report in Recode that broke the news seemed to imply that Spring had failed to be able to scale its business, despite its funding and the expansion of its business.
There has been an ongoing consolidation trend in e-commerce: a plethora of interesting looking startups have emerged over the year years that have found raising early money easy enough in the current climate, but have found the challenge of scaling (and the money that requires) to be hard, if not impossible. That has led to many of them either disappearing quietly, or retreating into a quiet but less fast-paced growth, or getting gobbled up.
Compass’s acquisition is another kind of interesting outcome. Finding good talent and assembling a team that has proven to be able to work together can be some of the biggest (and costliest) scaling challenges at startups, and tapping into that pool of startups that might otherwise be going out the door is one way to address that.