Eye Opener – Redfin Model Numbers vs. Reality


Guy Kawaski posted an insightful post comparing Redfin’s financial valuation numbers to reality during two years of operation, courtesy of CEO Glenn Kelman.

I was surprised to see how accurately the model predicted some of the costs associated to operations, taxes and services, and in contrast how far off it was when it came to HR/ recruiting. and recruiting.

If you can’t build an engineering team through your own network, recruiting fees can become a significant expense at an early stage.

In the second part of the article, Glenn provides the lessons learned for building a financial model. I recommend reading the full post, but in the meanwhile here’s the abbreviated version.

  1. Focus on headcount.
  2. Plan slow, run fast.
  3. Run top-down sanity-checks.
  4. Forget economies of scale.
  5. Admit that revenues are a mystery.
  6. Build from building blocks.
  7. Take out “hope”.
  8. Flag your assumptions.
  9. Hit $100 million in revenues within five years.
  10. Keep market-share under 20%.

According to alarm:clock, since Redfin’s last round of financing in May 2006, it claims to have completed more than $350M in real estate transactions, saved its home-buying customers nearly $6M in commissions, and increased revenues by more than 2,000%. They’ve raised three rounds totaling $20.8M to date.

Redfin combines MLS listing information (homes for sale) with historical sales data (homes already sold) into a single map. I mentioned Redfin in my post on Real Estate tools as one of the leading players in the market. Thanks for sharing Glenn and good luck.

Eze Vidra
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Eze Vidra

Chief Innovation Officer at Antidote
Eze is the Chief Innovation Officer at Antidote, a startup helping patients search and match to clinical trial, to accelerate medical breakthroughs. Previously, Ezewas a General Partner at Google Ventures Europe. Before GV, Eze founded and led Campus London, Google's first physical hub for startups, and was the Head Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.
Eze Vidra
Follow me

Eze Vidra

Eze is the Chief Innovation Officer at Antidote, a startup helping patients search and match to clinical trial, to accelerate medical breakthroughs. Previously, Eze was a General Partner at Google Ventures Europe. Before GV, Eze founded and led Campus London, Google's first physical hub for startups, and was the Head Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.