The $20 million equity investment deal will enable Real to improve its mobile app and expand its footprint to 50 states and several international markets.
The Real Brokerage Inc., the Canada-based holding company of brokerage Real, has raised $20 million through an equity investment deal with Insight Partners, according to an announcement on Thursday.
The funds will be used to bolster Real’s agent mobile app and expand the brokerage’s footprint, which currently includes 21 states and the District of Columbia.
“In the short term, new app services are focused on faster, more transparent commission payment, enhanced collaborative capabilities, and automated tools for communicating with clients,” Real co-founder and CEO Tamir Poleg explained in a short emailed statement to Inman. “New markets include expansion to all 50 US states with Ohio and Hawaii in the short term, as well as some possible international markets.”
Poleg established Real in 2014; however, the brokerage started gaining steam in 2016 after raising $7.2 million Seed Round funding and moving its headquarters from Houston to New York City. The $20 million comes from Insight Partners’ purchase of 17,286,842 preferred stock from Real Brokerage Inc.’s newly-formed United States-based subsidiary, Real Pipe LLC, for $1.18 per share.
“Insight has an excellent track record of identifying future market leaders and helping some of the world’s greatest tech companies in their journeys of transforming industries,” Poleg said in a press release, adding that “Insight’s Onsite ScaleUp engine will help us provide an unparalleled experience to real estate agents and their clients and expand into new markets.”
Agents are able to run their business with Real’s technology suite, which includes a customer relationship management system (CRM), branded IDX-integrated mobile and desktop site, CloudCMA-powered accounting and comparative market analysis tools, and a Dotloop integration to manage transactions and e-signatures. Real agents are also able to message each other through the mobile app and access on-demand assistance from brokers and support staff.
In addition to a virtual business model, Real offers an 85-15 commission split, which converts to a 100 percent split after individual agents reach a $12,000 annual cap. Team leaders have a $21,000 annual cap with a $6,000 annual cap for each of their team members.
There are no monthly fees, but Real agents must pay a $225 transaction fee and a $125 lease transaction fee after reaching the cap. There’s also a $500 annual brokerage fee paid taken from the first two transactions after agents’ and team leaders’ anniversary year.
In addition to a competitive commission split, Real agents can participate in the brokerage’s revenue share and stock option programs, that allow agents to have 5 percent of net commissions paid out in stock, earn stock by recruiting agents who reach their annual cap, or earn stock by reaching several production benchmarks outlined in Elite Agent stock guidelines.
Even with a virtual model, favorable commission splits, and stock options, Real has grown slower than its virtual competitors with the company’s agent count hovering at a little over 1,000 agents since 2018. In a previous Inman article, Poleg explained that Real has sacrificed a larger agent count to routinely purge unproductive agents and retain high producers.
“We approached those agents that we saw had no engagement and no interactions with us and no transactions, and we just asked them, ‘Are you serious about practicing real estate?’” Poleg said in 2018. “And whoever wasn’t, we kindly asked that they leave.”
Despite being small in scale, Real raked in $3.9 million revenue during the third quarter of 2020 — a 12 percent year-over-year and 52 quarter-over-quarter increase. The company’s annual gross profit also increased a whopping 73 percent from $425,000 to $741,000.
Insight Partners Vice President AJ Malhotra said he believes in Real’s business model and growth strategy, which finally landed the brokerage on REAL Trends 500 and Inc. 500 lists in 2019.
“Real leverages best-in-class technology to help real estate agents earn more and build financial security,” Malhotra said in a written statement. “Our experience and track record in scaling software companies combined with the Real’s tech-driven platform will form a valuable partnership in helping the company continue to expand its agent network, grow its geographic footprint in the U.S., and add additional services to its offering.”