Door Raises $12 Million Series A to Expand Flat Fee Brokerage: Let’s Discuss

We all know Alex Doubet, his flat-fee brokerage Door, which is home-grown, founded and it turns out funded right here in Dallas/Park Cities. We know the story of how he founded the company right out of Harvard, because he thought his mom had paid too much to the agent when she listed and sold her own Park Cities home.

(Real estate brokers get paid thusly: the broker on each side of the deal takes, on average, three percent of the selling price of the home, which is split 50/50 broker/agent. So, if a house sells for $500,000, the seller and buyer’s broker(s) collectively take $30,000 off the table for themselves. But the 3% commission rate is almost always negotiated, especially in higher priced properties, as is the agents’ split. The Door way would be a $10,000 commission on this deal.)

Alex, like many Millennials, likes to think of himself as a disruptor. And he has done a terrific job of promoting himself to date, with billboard ads, even appearing on stage at Inman Real Estate Connect in NYC, which is a pay-to-play gig but hey, you get what you pay for. He listed a challenging neighbor’s home that did not sell, but they were very pleased with the service.

There is nothing new to his flat-fee brokerage model, that has been tried and, in some cases, proven successful at certain price ranges. It may even be successful at “uncertain” price ranges, too, as home prices contract.

But what is watchable about DOOR is that he is getting people to write checks to expand the company.

According to CrunchBase news, the company “closed the final chunk of an approximately $12 million Series A round, which was raised in multiple tranches. Door’s CEO, Alex Doubet, confirmed this in a phone interview with Crunchbase News.” 

Interestingly, the company has only raised a small chunk of its capital from traditional VCs, including a $500,000 Series A check from Picus Capital, a German venture fund started by Rocket Internet co-founder Alexander Samwer.

The rest has come from the private investment offices of several wealthy families in Texas. The lead investor in Door’s round, Court Westcott, is a Dallas-based investor and the son of Carl Westcott, a prominent entrepreneur in the area who founded 1-800-FLOWERS, among other ventures. Other investors include Jack Pratt, retired CEO of Hollywood Casinos, Door’s chairperson Roger Ochs, Thomas Hartland-Mackie, and “several members of the Murchison[s],” an oil family that also set up the Dallas Cowboys football franchise.

When asked why he was courting family investment offices, “Doubet characterized Texas as a VC desert, remarking that, despite having four of the most-populous cities in the U.S., there’s a “surprising lack of institutional funding available.”

Hmm.

It’s a trend that Crunchbase News has observed in its quarterly reporting on the Texan venture capital market.

“He says that the younger generation of high net worth families often lead the way in encouraging Texas’s family financial managers to extend beyond “oil wells, fracking, and shopping centers” to invest in technology startups.” Could it also be that some of these are high school friends or family friends?

Doubet remarked that although the large majority of his company’s capital did not come from traditional VCs, he’s confident in the guidance his investors, who he called “experienced operators,” can provide. He also told Crunchbase News that there’s a perception that “generational wealth” can be more patient with its capital appreciation, but he says Door is expected to grow at the same pace of any VC-backed startup. Door was involved in 75 real estate transactions in 2016, just over 300 in 2017, and is projected to do over 1,000 in 2018. 

And we hear Door is expanding into other Texas markets, opening up a mortgage company, which makes smart total sense. 

As I said and even told a KXAS reporter, Door is not the first company to tackle the home brokerage business with a flat-fee business model. But can flat fee work when the agent has no skin in the game?

Open Listings has raised $7.5 million across two rounds. London-based PurpleBricksraised £66 million in VC and another £25 million in an IPO on the London Stock Exchange to enter the US market. 

The agent/broker commission in real estate is one of the lowest hanging fruits on the vine. Everyone and their brother wants a piece of the action. But the fact is, some of the fastest-growing brokerages in the country are of the 100% commission model. Including our own JP& Associates. Last year, San Diego-based 100-percent commission brokerage Big Block Realty came in at no. 31  on the Inc. 500 list as the top-ranked company in the real estate category with a growth rate of 8,829 percent in 2016 and revenue of $28.9 million.

Every year Inc. Magazine ranks the 5,000 fastest-growing privately held companies in the U.S. 17 real estate companies made the top 500 cut in 2017, while 196 made the 5,000 list, based on revenue growth from 2013 to 2016. Big names who have made this list: LinkedIn, Zillow and Yelp were all Inc. 5000 honorees before they went public.

Digging deeper into the brokerage rankers, My Home Group Real Estate had a growth rate of 1,792 percent and sales volume of $1.1 billion. Led by former Keller Williams-trained agents, Mark Hutchins and Jereme Kleven, the company has 18 offices in Arizona, California and Washington.

New York City-based brokerage Triplemint, which closed a $4.5 million Series A funding round in February, came in at no. 325, behind Worth Clark.

Texas-based Fathom Realty CEO Josh Harley said he was happy to have made it into the Inc. 500 for the fourth year in a row. The company’s growth rate was 1,545 percent with revenue of $41.8 million.

Frisco, Texas-based JP & Associates Realtors, which recorded a growth rate of 773.5 percent in 2016, ranked at 586.

And here is one to really watch: EXP Realty.

I found an article from 2014 listing the top 10 brokerages by sales volume for 2013 — note NRT (Coldwell Banker, Sotheby’s etc.) and our very own Ebby Halliday on the list. (I’m hunting for more recent, but have to stop here — ping me if you have one handy.) And keep in mind that Compass, which bills itself as a tech company that sells real estate (but with the traditional commission split, and one service provider for every 7 agents) has more than $775 million in its coffers — and no debt — continues to march onward to it’s goal to gain 20 percent marketshare in the top 20 metropolitan U.S. markets by 2020.

1. NRT LLC: $151.1 billion
2. HomeServices of America Inc.: $63.5 billion
3. The Long & Foster Companies Inc.: $26.1 billion
4. Douglas Elliman Real Estate: $15 billion
5. Alain Pinel, REALTORS®: $10.5 billion
6. Hanna Holdings Inc.: $9.1 billion
7. Realty ONE Group: $7.2 billion
8. William Raveis Real Estate Inc.: $7.1 billion
9. Ebby Halliday Real Estate Inc.:  $6.4 billion
10. First Team Real Estate: $5.9 billion