High-flying startups Divvy Homes and EasyKnock are the latest to suffer
Many proptech startups, born and funded during the peak of low interest rates, are in the midst of struggle. As investments in U.S. real estate startups decline from $11.1 billion in 2021 to $3.7 billion last year, according to PitchBook data, some are selling themselves, while others are closing up shop.
The last two examples are the latest victims of a difficult interest rate environment and long years Real estate fintech funding slowdown.
Rent-to-own startup Divvy Homes is being acquired in a fire sale by Charleston, South Carolina-based Maymont Homes, Fast Company. I mentioned Last week. Maymont is a division of Brookfield Properties.
EasyKnock suddenly shut down, NPR I mentioned last month. This was followed by a closure Several lawsuits have been filed against Proptech and FTC Consumer Alert About the controversial sale and leaseback models, which involved buying homes from owners and renting them out at the same time.
While 9-year-old Divvy declined to comment, a source familiar with the matter confirmed to TechCrunch that Divvy is in talks with Brookfield and is “close to signing the purchase agreement.” This person doubted that the acquisition was a sell-off. However, neither the company nor the source shared how much Brookfield would pay for Divvy, so it’s not yet clear whether the price is a deal or a blessing.
Its sale, fire or not, isn’t exactly a shock. Signs of trouble began to appear at Divvy in 2022, when the company began laying off employees. By November 2023, Divvy had made its third layoff in one year.
The startup, which was once a business, has raised more than $700 million in debt and equity from well-known investors such as Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z), among others. Divvy’s last known funding occurred in August 2021 – Series D financing of $200 million Led by Tiger Global Management and Caffeinated Capital at a valuation of $2 billion. The Series D round was announced just six months later Series C worth $110 million. Divvy Homes’ last known valuation was $2.3 billion in 2021, according to Pitchbook.
EasyKnock, a startup that bills itself as the first technology-enabled residential sale-and-lease provider, was founded in 2016 and has raised $455 million in funding from backers, including Blumberg Capital, QED Investors and the investment arm of Northwestern Mutual, according to PitchBook. Data. Nearly $200 million of that capital was in the form of debt that allowed the company to buy homes, according to a person familiar with the startup.
So what went wrong?
In its heyday, Divvy Homes claimed to be different from other proptech companies because it worked with renters who wanted to become homeowners by buying the home they wanted and renting it back to them for three years while they built “the savings needed to own,” as they put it themselves.
But the Federal Reserve has begun raising interest rates in 2022 on a mission to curb inflation. For companies like Divvy Homes, which purchased homes as part of their business model, the high prices were devastating, limiting their ability to purchase homes and make money from those purchases.
EasyKnock’s business model also includes buying and renting homes. But its arrangement attracted homeowners with poor credit scores because it gave them access to quick cash, along with the option to buy back the home at a later date.
High interest rates also hurt it, as it borrowed to finance its operations, sources familiar with the company told TechCrunch. But EasyKnock faced additional problems. more than Twenty lawsuits have been filed against Easy Knox, W Michigan Attorney General The company allegedly used “Deceptive practicesBy buying homes from people suffering from financial pressure at low prices and then charging them high rents.
According to our sources, EasyKnock was insolvent when it closed, saddled with debt.
With interest rates remaining relatively high, and financing remaining difficult to obtain, we can likely expect more of this type of news from the real estate fintech space in the coming months and perhaps throughout 2025.
Are you aware of a problem with your Proptech startup? Contact Mary Ann at marian@techcrunch.com Or via Signal at 408.204.3036 or Marina.temkin at techcrunch.com.
