A Very Tough Day

Redfin and Our CEO

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 Redfin.

The Layoff & Redfin’s Values

That’s because Redfin folks have always been believers. We earn our salaries from 9 to 5 but everyone leaving today gave a lot more than that.

The company has always had a sense of mission – to change the real estate game in consumers favor, yes, but also to be an open, humane place to work. It may seem now like we are a business that cares only about profits.

We aren’t. The whole company has been dedicated to the idea that money is how businesses work, but not why.

We want to make money, yes — and not just a little — and we absolutely have to avoid running out of it, but we haven’t given up on our larger ambitions: to build a new kind of company for employees and consumers alike.

To Those Leaving

Even under great financial pressure, we have treated departing colleagues as generously as we could: less than we would have liked, but as much as we could possibly afford.

To those who left, I can only say thank you for all that you’ve done for Redfin, and I’m sorry. It wasn’t your fault that you had to leave, and we will do what we can to help you take your next step. We’ll miss you, and we wish you the best of luck.

What Next for Redfin?

And now, we have to answer the question the rest of Redfin is asking: is this the beginning of the end? No, I don’t think so.

We are one of the few startups to offer:

  1. an essential service
  2. directly to paying clients
  3. that yields multi-million dollar revenues.

A real business used to be unfashionable, but now it’s indispensable.

The Best Website

The sky may be falling in financial markets but our competitive dynamics haven’t changed. We can become the #1 real estate search site because our data is better than the media sites’ and we think our engineers are better than other brokers’. We’re willing to share more data with the consumer than either one of them.

An Essential Service

Our value proposition isn’t entertainment; it’s to make a fundamental service better and cheaper. We offer an alternative to traditional brokers that customers want, and not in some namby-pamby nice-to-have way. Our market, even if it shrinks to half its recent size, would be $30 billion per year.

A Large Market…

That means we have plenty of room to grow. But we won’t grow without taking big chunks of market-share, which also means we’ll have to keep tinkering with our offering so it appeals to the mass market. We’ve been planning a change to our service for months, which we’ll launch in November.

But We Have to Change

Change is painful, but necessary. Late in Charles Darwin’s life, when he was busy rejecting the application of his principles to social policy, he explained that “it is not the strongest of the species that survives, nor the most intelligent… it is the one that is the most adaptable to change.”

It’s tempting to write Redfin off now precisely because we are adapting to the market. At my last startup, we adapted quickly, laying people off early in the dot-com bust. Many wrote us off. But in 2002 we completed one of only two high-tech public offerings that year.

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.

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