Many proptech startups, born and funded during the heyday of low interest rates, are struggling. Investments in U.S.-based real estate startups will drop from $11.1 billion to $3.7 billion in 2021, according to PitchBook data, as some sell themselves and others shutter.
Two recent examples are the latest deaths and protracted years of a challenging interest rate environment. Slow for real estate fintech funding.
rent-to-own proptech startup Divvy Homes in Charleston; South Carolina-based Maymont Homes; It's being bought at a fire sale by Fast Company. reported. last week. Maymont is a division of Brookfield Properties.
EasyKnock suddenly closes; NPR reported. Last month. I had to close this. Several lawsuits have been filed against the proptech company. and one FTC Consumer Notice about the controversial sale-leaseback model, which involves buying homes from owners and simultaneously renting them back to them;
9-year-old Divvy declined comment, but a person familiar with the matter confirmed to TechCrunch that Divvy is in talks with Brookfield and is “close to signing an acquisition agreement.” This person disputes that the purchase is a fire sale. However, Neither the company nor the sources have shared how much Brookfield might pay for Divvy, so it's unclear whether the price is a bargain or a bargain.
sold or Whether it burns or doesn't sell isn't a shock at all. Signs of trouble appeared at Divvy in 2022, when the company began laying off employees. In November 2023, Divvy made its third layoff in a year.
The once controversial startup Tiger Global Management; It raised more than $700 million in debt and equity from well-known investors such as GGV Capital and Andreessen Horowitz (a16z). Divvy's last known funding took place in August 2021 — $200 million in Series D funding Led by Tiger Global Management and Caffeinated Capital at a $2 billion valuation. The Series D tournament was announced six months later. $110 million Series C. The last known value of Divvy Homes was reported to be $2.3 billion in 2021. PitchBook.
EasyKnock, a startup listed as the first technology-enabled residential sales-leaseback, was founded in 2016 by Blumberg Capital, It has raised $455 million in funding from backers including QED Investors and the corporate arm of Northwestern Mutual, according to PitchBook. Data. About $200 million of that capital is a form of debt that allows the company to buy homes, according to a person familiar with the startup.
So what happened?
In its heyday, Divvy Homes claims it's different from other real estate tech companies, saying it works with renters who want to be homeowners and rents back to them for three years while they build it, “the savings you need to own.”
But the Federal Reserve began raising interest rates in 2022 with the goal of controlling inflation. For companies like Divvy Homes that buy homes as part of its business model; High rates are devastating and limit his ability to buy homes and make money from those purchases.
EasyKnock's business model also includes buying and renting houses. But his program attracted homeowners with poor credit scores, with quick cash and the option to repurchase the home at a future date.
High interest rates are also taking a toll, as sources familiar with the company told TechCrunch that it takes credit for its operating financing. But EasyKnock has more problems. more than There were about two dozen lawsuits. With EasyKnocks Attorney General of Michigan The company is accused of usingDeceptive practices“By buying houses from people in financial distress at low prices and paying them rent.
According to our sources, EasyKnock went bankrupt when it was burdened with debt.
With interest rates still relatively high and funding difficult to come by, we can expect more of this type of news from the real estate fintech space in the coming months and possibly all of 2025.
Have you noticed a proptech startup in trouble? Contact Mary Ann! maryann@techcrunch.com or via Signal at techcrunch.com at 408.204.3036 or Marina.temkin.