Redfin Layoffs Bode Ill for Real Estate Startups
Is this the beginning of the end for online real estate companies? Yesterday, Seattle-based Redfin announced it had laid off roughly 20 percent of its employees, leaving it with a staff of about 75 spread across Seattle, Boston, Los Angeles, Washington DC, and Chicago.
The news comes as a serious blow to a company that prides itself on providing a fundamental service focused on consumers, and making it cheaper and better than alternatives—in this case, traditional real estate brokers. It’s also the first big venture-backed startup in Seattle to cut staff since the financial crisis hit—which makes us wonder who might be next. Redfin had raised more than $20 million in venture capital from the likes of Madrona Venture Group, Draper Fisher Jurvetson, and Vulcan Capital.
On his company blog, Redfin chief executive Glenn Kelman expressed remorse for the staff cuts, but explained why they were necessary. “As the stock market wiped out prospective down-payments, tours and offers dropped 30%. Transactions that were done came undone. October will still be pretty good, then we’re headed for a big dip,” he said.
But Kelman also explained why he thinks Redfin can ride out the crash. “The sky may be falling in financial markets but our competitive dynamics haven’t changed. We can become the #1 real estate search site because our data is better than the media sites’ and we think our engineers are better than other brokers’…It’s tempting to write Redfin off now precisely because we are adapting to the market,” Kelman said. “Redfin’s whole business will struggle and fight and may yet fail. But the only way it is possible for us to succeed—and, even today, I believe we will—is if we adapt.”