The Redfin business model is centered around real estate brokerage services. Redfin is currently one of the most popular real estate platforms in America. According to the company, it has over 40 million monthly users.
So, what makes this company stand out in the business world? Let’s find out with a business model analysis on Redfin.
Contents
Redfin was founded in 2004 by David Eraker, Michael Dougherty, and David Selinger. David Eraker was inspired to create Redfin with the hopes of disrupting the conventional real estate brokerage business.
David Eraker dropped out of the University of Washington from a career in software design, and Michael Dougherty was an electrical engineer from Yale University. Together, they came up with an innovative idea to display homes for sale on an interactive map.
Redfin used this map-based real estate system to display available homes in a particular area. This was achieved by pairing satellite maps with real estate information to provide consumers with a better home buying experience.
The technology helped Redfin overcome the limitations of the online real estate search systems available at the time. Redfin disrupted the real estate industry and drove some competitors out of business.
Redfin essentially made selling and buying houses more efficient than traditional brokerages. David Selinger later joined the company as the third founder and helped to build the mapping and real estate data analytic engine at Redfin.
After receiving $1 million in initial financing from Madrona Venture Group, in May 2006, Redfin raised 8 million in a Series B funding led by Vulcan Inc. Later, in 2007, the company received another round of funding from Greylock and Draper Fisher Jurvetson.
Subsequent funding raised $50 million in a round led by T. Rowe Price and Tiger Global Management, bringing its total funding to about $96 million.
The company raised another $70.9 million in December 2014. This round of funding led by Wellington Management Co. and Glynn Capital Management, plus others, was done in order to expand its software-powered real estate service in the U.S.
Redfin finally went public on July 28, 2017, raising $138 million, and starting with a share price of $15. Redfin stock closed at $21.72 on the first day of trading, giving the company a market capitalization of $1.73 billion. As of April 2022, the company’s share price sits at about $11.73 per share.
Redfin is owned by its shareholders because it’s a publicly-traded company. Institutional investors currently own over 90% of the company shares, leaving its angel investors and management with a small portion of the company stock.
“Redefine real estate in the consumer’s favor.”
Redfin makes money from listing fees charged on homes sold through its platform. Additionally, the company purchases properties through its instant buyer program (Redfin Now) and sells them for a profit. They also make money by referring clients to their affiliates or partners.
Below, there is a breakdown of the ways that Redfin makes money:
The company charges a 1 to 1.5% listing fee for buying and selling on its platform. Redfin makes the majority of its revenue through these commissions.
The company also makes money from selling homes, which is its second-largest revenue stream. Redfin purchases properties from homeowners and sells them for a profit.
Redfin works with other partners and agents to sell properties. The company sends client referrals to its partners in exchange for a referral fee.
Below, there is a detailed breakdown of Redfin’s business model canvas:
Redfin’s customer segments consist of:
Redfin’s value propositions consist of:
Redfin’s channels consist of:
Redfin’s customer relationships consist of:
Redfin’s revenue streams consist of:
Redfin’s key resources consist of:
Redfin’s key activities consist of:
Redfin’s key partners consist of:
Redfin’s cost structure consists of:
Below, there is a detailed SWOT analysis of Redfin:
Buying and selling homes have become more accessible in the past few years, due to the rise of online real estate companies.
Redfin’s business model is based on helping its customers find a home with services like brokerage, instant buying (Redfin Now), rentals, lending insurance, and renovation of real estate.
The company is popularly known for having a one percent fee and offering cash offers to buy up houses from their customers. According to the company, it has saved consumers more than one billion in real estate commissions.
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Very nice insights and its comprehensive.