Urban Compass Valued at $150 Million After Funding Round

After selling two Internet startups to Google Inc. and Twitter Inc., Ori Allon plans to announce a $20 million funding round today for a company that sifts through another kind of complex data: New York apartment rentals.

The investment in Urban Compass -- started by Allon and Robert Reffkin, a veteran of Goldman Sachs Group Inc. -- values the company at $150 million, according to a person with knowledge of the terms. That’s five times the value of the company at its $8 million seed round in November 2012, said the person, who asked not to be identified because the information is private.

Urban Compass uses its photo-rich website and a team of “neighborhood specialists” to lead people to apartments, charging less than one month’s rent if a deal is signed. With the new investment, which includes backers such as Founders Fund and Conde Nast, Urban Compass will hire more local representatives and build a network of businesses to offer users services after they’ve moved in.

“We are really focused on the after-market right now -- what happens once you move in and how we can help you,” Allon said in an interview at the company’s headquarters in New York’s SoHo neighborhood. “We are the first ones to know you have a new address.”

The company is in discussions with investors that may increase the funding round to $25 million in the coming months, the person with knowledge of the terms said. Revenue is approaching $1 million a month.

Allon has spent most of his career developing and perfecting search algorithms, with one startup that was wrapped into Google search and another that became the basis for Twitter’s Discover tool. Now, he’s moved on from the world of interest graphs and targeted content to a more concrete goal: knowing where his customers live and what they might need.

Real World

“I can get a great algorithm going, but we still haven’t fixed ways to connect technology to the real world,” he said. The company is forging partnerships with businesses and developing a product that will generate local deals and content, with plans to introduce the service in the next few months. The idea is to create a digital hub to help businesses and residents in a neighborhood interact, he said, without providing further details.

Urban Compass debuted four months ago with much fanfare, including a speech by Mayor Michael Bloomberg, because finding an apartment has become more difficult. In New York City, the vacancy rate for apartments hovers between 1 percent and 2 percent, according to Jonathan Miller, president of appraiser Miller Samuel Inc. New Yorkers have endured 26 consecutive months of rising rents as employment improves, he said.

M&A Moves

Zillow Inc. purchased StreetEasy last month for $50 million to expand in New York and compete with Trulia Inc. and other real-estate listings providers. Meanwhile, broker groups such as Citi Habitats have improved their websites, Miller said. Urban Compass’s neighborhood consultants, who give customers apartment tours like brokers do, aren’t paid on commission, Allon said.

Allon said his site will be able to compete because of its map-based design and the services it ties to the move. Besides Founders Fund and Advance Publications Inc., the parent company of Conde Nast, his backers include Salesforce.com Inc. Chief Executive Officer Marc Benioff and Thrive Capital. Goldman Sachs has also provided funding in the past. Before expanding to other cities, Urban Compass is focusing on adding the new features in New York.

Sweaty Room

The background of the founders may have raised the stakes for the team and helped push Urban Compass’s valuation higher. Allon’s co-founder Reffkin was previously chief of staff for Goldman Sachs President Gary Cohn, after working in the firm’s private-equity arm for five years. He founded a New York philanthropic organization that has helped connect the company to influential people.

It’s a stark contrast with Allon’s first startup, which he developed in a small, sweaty room of computer servers while working on a computer-science doctorate in Sydney.

“After you’ve been successful, people assume your ideas are right,” said Allon, who was born in Israel. “But you have to work hard to keep up the reputation.”

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