Seattle’s Redfin announced on their blog yesterday that they laid off 20% of their employees. Redfin was the industry’s first online brokerage for residential real estate with a focus on technology and a consumer-centered business model that promised better results at a fraction of the price. Unlike other soon to be cash-starved startups, Redfin’s industry has been under siege since home prices in the US first started plunging a year ago.
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.
Redfin President and CEO Glenn Kelman plans to stick the course and believes that his startup is a real business with an essential service, a direct offering to paying clients, and the potential of multi-million dollar revenues. Only time will tell.