A Very Tough Day…
Today Redfin laid off roughly 20% of our employees.
Unlike other startups, our industry’s recession started a year ago, when home prices first plunged.
Since then, we’ve fought like starving animals, and with some success: while industry-wide transaction volumes dropped 33%, we grew revenues by nearly 50%. Traffic grew more than 300%.
Even a month ago, we were raising 2009 revenue projections. All our markets, now including Chicago, contributed profits.
But the past few weeks have seen a major reversal. 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.
Hence the layoff. Layoffs are painful for any company, but especially for a startup and especially, I think, for Redifn.
Another sign of the times and the inability to adapt when you’re running a razor thin margin already. We’ve heard for some time that Redfin’s San Diego office was essentially a ghost town being run remotely by a single agent, we knew it was a matter of time before something happened, but the opening of the Chicago office masked the inevitable reality.
We suspect this is only the beginning of a trend in the space of startups within and outside of the real estate space beginning last week with Seesmic laying off 1/3 of its staff.
Glenn says it best, “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.” I think this is a great reminder to everyone in the real estate or technology industries.
October 13, 2008 at 8:06 pm
Wow…that sucks for those that got pink slips today. I know the feeling firsthand, having gone through that process (both giving and receiving pink slips) in my previous career in the technology sector. Obviously, they aren’t the only ones impacted recently, as I have seen many title companies either close or consolidate to just stay alive.
There will be those who may take glee in Redfin’s stumble. I certainly have mixed feelings. Being a techie at heart, I always root for the underdog and for those who have the “cajones” to take a risk (hence the decision to go into business for myself.) However, it was difficult for me to root for Redfin when much of their marketing effort was to deliberately attack the self-employed Realtor with outright lies and half-baked statistics. That’s how the verb “Redfinned” was coined.
Real estate is NOT like the technology industry in that respect. A “take no prisoners” approach is essential in the technology industry, but it’s absolutely fatal in an industry that mandates cooperation by definition. Competition is healthy — that’s why we work so damn hard on our blogs! But some of the underhanded tactics that Redfin (and some other discount brokerages) engaged in rightfully backfired.
Out of the ashes of this market will arise a different real estate industry. Lets just hope that lessons were learned by all…
October 13, 2008 at 9:01 pm
I sympathize with those who were laid off. We just went through that in my own house and were juggling for about six weeks until the wife went back to work.
Sympathy aside, though, this really isn’t a surprise. Margins for most brokerages are thin from the start and narrowing those margins even further, as Redfin has done, only can lead this direction when the revenues are not what was anticipated.
It does tend to make you wonder what happened to all the venture capital, though. It hasn’t been all that long since the last infusion, unless it only was the infusions keeping the patient alive.
October 13, 2008 at 9:50 pm
Letting Cynthia Pang go is a massive mistake on Redfin’s part. That’s the only surprising part to me.
October 14, 2008 at 12:22 am
My comment on the Redfin blog:
Having been in corporate Human Resources in my pre-real estate life and personally delivering over 3,000 “pink slips” (before getting one myself) I can attest to how much it sucks — from both sides.
I can also tell you that though it may not seem like it now, you may be surprised how many of those that are laid-off bounce back and become bigger stronger and faster than they were before. I’ve seen it happen hundreds of times.
Nice post Glenn. I suspect some will be cheering (more than just those with the insensitive comments here) but ignore them and keep plugging away.
And I’ll add here on AG — Cynthia rocked. She’ll do well in whatever she pursues.
October 14, 2008 at 10:37 am
I don’t think anyone that has commented on this post was either a) cheering or b) insensitive. Honest? Definitely. But we can do without the potshots…
October 14, 2008 at 11:31 am
Chuck – my comment was copied over from what I left on the Redfin blog, where comments included:
“Thank you for getting rid of the lazy, weaker employees!”
“Not surprised. You should have fired that ass of a CTO a long time ago.”
“Couldn’t happen to a nicer guy!”
Those are a bit on the insensitive side in my opinion. I don’t know everyone that was laid off at Redfin, but I can assure you that Cynthia Pang for one was neither lazy or weak.
October 14, 2008 at 1:49 pm
@Lani and @Jay Thompson: It has been a tough couple of days, but your very kind words made me smile. I love how the simple act of blogging, commenting and sharing ideas creates friends. Thank you and I hope our paths cross again.
October 14, 2008 at 1:57 pm
Ouch…now THOSE are definitely insensitive!! I understand now (I thought you were referring to JD’s and my comments — my bad on that one.)
Competitor or not, those three comments you cited were definitely over the line.
October 16, 2008 at 9:19 am
According to MLSPIN.. Since 01/01/06+ Redfin Boston…
123 Sold and closed.. mostly on the buyer side.
15 Sales Pendings
For Coldwell Banker Worcester Office (Park Ave) Just the Worcester office, not the other surroundiing offices…
Since 01/01/07+ NOT 06, BUT 07
78 on deposit.
I’d hate to see for Redfin’s sake what the numbers would be if I used Boston Area Coldwell Bankers for comparison… or used Worcester since 06…
Honestly, I’m amazed Redfin’s lasted THIS long..
Cynthia, call Coldwell Banker Hdqtrs and ask for Richard Loughlin (President) or Bob Shortsleeve… CBRB’s a great place to work…nothing 100%, but in Mass, CBRB rocks!
October 16, 2008 at 9:41 am
Correction; for ALL statuses, my above numbers include rentals.. I tried logging into MLSPIN again but their system is down LOL..
October 16, 2008 at 4:02 pm
First I am not Glenn Kelman – laying off people is not fun and can be very emotional for both the employer and the employee – I really for the employees.
I fear that the downturn will not take down start-ups but also well established businesses.
November 13, 2008 at 8:09 am
Let me be the one to cheer, YEEAHH! I was redfinned on a listing where i showed a shlum around for 2 months. He went behind my back and bought a property i introduced him to with Redfin for the commission.