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Redfin’s Strong Debut Soothes Nerves, for Now, in Real Estate Tech

While post-IPO stock dives from Snap and Blue Apron have alarmed some private tech companies, startups that help people buy homes are pinning hopes on the positive debut late last month of Redfin. The company, a web-based brokerage, on Tuesday closed up 70% from its initial public offering price.

Some investors say it isn’t clear that Redfin’s success is sustainable or will translate across the industry. Even so, it represents a twist of fate for real estate tech startups, which have had to win over investors scared off by the cyclical real estate industry as well as past slumps by companies like ZipRealty and Redfin itself.

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Mr. Lehman of Compass said it attracted agents because of its software offerings that make agents more efficient, and has offered signing bonuses to fewer than 3% of its agents. A spokeswoman said the company's agent incentives are in line with industry norms. Mr. Lehman said the firm is now the No. 1 brokerage in Washington, D.C., and is profitable in San Francisco, which it opened nine months ago. He remains steadfast that the company’s growth trajectory is similar to a tech company’s. “Everything is the same the way Uber expands—we need to make sure the technology works in each ecosystem,” he said.

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“It’s a slower business to build, so venture investors have appropriately been very cautious for some time.”