Many proptech startups, born and funded during the low-interest-rate heydays, are in the throes of struggle. With investments into U.S.-based real estate startups falling from $11.1 billion in 2021 to $3.7 billion last year, according to PitchBook data, some are selling themselves off, while others are closing shop.
The two most recent examples are the latest casualties of a challenging interest rate environment and the years-long slowdown in real estate fintech funding.
Rent-to-own proptech startup Divvy Homes is being acquired in a fire sale by Charleston, South Carolina-based Maymont Homes, Fast Company reported last week. Maymont is a division of Brookfield Properties.
EasyKnock abruptly shut down, NPR reported last month. This closure followed several lawsuits filed against the proptech company and an FTC consumer alert about its controversial sale-leaseback models, which involved buying homes from the owners and simultaneously leasing the homes back to them.
While 9-year-old Divvy declined comment, a source familiar with the matter confirmed to TechCrunch that Divvy is having conversations with Brookfield and is “close to signing a purchase agreement.” This person disputed that the acquisition was a fire sale. However, neither the company nor the source shared how much Brookfield could pay for Divvy, so it’s not yet clear if the price is a bargain or a boon.
Its sale, fire or not, isn’t entirely a shock. Signs of trouble began appearing at Divvy in 2022, when the company began laying off staff. By November 2023, Divvy had conducted its third layoff in a year’s time.
The once-buzzy startup had 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 — a $200 million Series D funding led by Tiger Global Management and Caffeinated Capital at a $2 billion valuation. The Series D round was announced just six months after a $110 million Series C. Divvy Homes’ last known valuation was $2.3 billion in 2021, according to PitchBook.
EasyKnock, a startup that billed itself as the first tech-enabled residential sale-leaseback provider, was founded in 2016 and had raised $455 million in funding from backers, including Blumberg Capital, QED Investors, and Northwestern Mutual’s corporate venture arm, according to PitchBook data. Approximately $200 million of that capital was in a form of debt that allowed the company to buy the homes, according to a person familiar with the startup.
So what went wrong?
In its heyday, Divvy Homes claimed to be different from other real estate tech 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 it themselves,” it said.
But the Federal Reserve began raising interest rates in 2022 on a mission to curb inflation. For companies like Divvy Homes, which purchased homes as part of its business model, high rates were devastating, limiting its ability to purchase homes and make money off those buys.
EasyKnock’s business model also involved buying homes and renting them. But its arrangement attracted homeowners with poor credit scores because it gave them access to quick cash, along with the option to repurchase the home at a future date.
High interest rates also hurt it, as it took on debt to finance its operations, sources familiar with the company told TechCrunch. But EasyKnock had additional problems. More than two dozen lawsuits were filed against EasyKnocks, and Michigan attorney general alleged that the company used “deceptive practices” by purchasing homes from those in financial stress at low prices and then charging them high rents.
According to our sources, EasyKnock was insolvent when it shut down, overburdened by debt.
And with interest rates still relatively high, and funding still difficult to come by, we can likely expect more of this type of news from the real estate fintech space in the coming months and perhaps for all of 2025.
Are you aware of a proptech startup in trouble? Contact Mary Ann at [email protected] or via Signal at 408.204.3036 or Marina.temkin at techcrunch.com.
