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Startup paradox: with few users, Urban Compass is nearly profitable and expanding fast

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After taking on New York, an apartment rental startup eyes San Francisco

urban compass app
urban compass app

When Urban Compass debuted to the public in May of this year, it had its fair share of doubters. The company was trying to reinvent the process of searching for an apartment in New York, a notoriously expensive, difficult, and fraud-filled endeavor. Four months later the company is approaching profitability, raising another $20 million in venture capital, and plotting its expansion into new cities like San Francisco, Boston, and Chicago.

It has relatively few users but gobs of revenueThe company is unusual for a tech startup: it has relatively few users but gobs of revenue. Every time it helps to rent an apartment the company earns several thousand dollars, and it's currently doing that hundreds of times a month. CEO Ori Allon had sold his previous two companies, both search engines, to Google and Twitter. For his third outing, he wanted to do something different. "I was tired of building companies that attracted hundreds of thousands of users but had no clear business model."

The big question now is whether Urban Compass can find success in other cities. New York is a unique market, with extremely low vacancy rates and a notorious class of shady brokers. The logical next stop would be San Francisco, where IPOs have created a wave of newly minted millionaires and sent prices soaring, with many forced to move after their monthly rents doubled overnight.

In the meantime Allon says the company is building out the range of services it offers to its current clients. It has already layered on moving services and local recommendations. In the future it hopes to include neighborhood deals and events, creating a community hub that begins with moving in but extends to daily life.

"We have to show that we can defend it against the competition."But competition is increasing. Zillow, the largest real estate service in the country, recently acquired StreetEasy to focus on New York and local broker groups such as Citi Habitats have been evolving their websites to keep pace with Urban Compass. "We've proved in a short time that our model works," says Allon. "Now we have to show that we can defend it against the competition."