Many proptech startups, born and funded during the heyday of low interest rates, are in the thick of the race. With investment in US-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 up shop.
The two most recent examples are the latest victims of a challenging interest rate environment and the years-long slowdown in real estate fintech funding.
Protective Technology Rental Company Divvy Homes Acquired by Maymont Homes, Charleston, South Carolina-based Fast Company was mentioned last week. Maymont is a division of Brookfield Properties.
EasyKnock Shut Down Abruptly, NPR was mentioned last month. This was followed by closure many lawsuits filed against the proptech company and one FTC Consumer Notice on controversial buy-to-let models, which involved buying homes from owners and simultaneously renting the homes to them.
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 a purchase agreement.” That 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 whether the price is a bargain or a blessing.
Its sale, fire or not, isn’t a complete shock. Signs of trouble began to appear at Divvy in 2022, when the company began laying off staff. By November 2023, Divvy had made its third layoff in a year.
The once buzzing 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 was in August 2021 — $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 the last known $110 million Series C valuation of Divvy Homes was $2.3 billion in 2021, according to PitchBook.
EasyKnock, a startup billed as the first technology-enabled home rental provider, was founded in 2016 and had raised $455 million in funding from backers including Blumberg Capital, QED Investors and the corporate venture arm of Northwestern Mutual , according to PitchBook. data. About $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 it was 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 up “the savings needed to acquire the same”, he said.
However, the Federal Reserve has begun raising interest rates in 2022 in a mission to curb inflation. For companies like Divvy Homes, which bought homes as part of its business model, the high rates were devastating, limiting its ability to buy homes and make money from those purchases.
EasyKnock’s business model also involved buying homes and renting them out. But his arrangement appealed to homeowners with poor credit scores because it gave them access to quick cash, along with the option to buy the home back 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 against two dozen lawsuits EasyKnocks and Attorney General of Michigan claimed that the company used “deceptive practicesbuying homes from those in financial distress at low prices and then charging them high rents.
According to our sources, EasyKnock was insolvent when it closed, saddled with debt.
And with interest rates still relatively high and financing still tight, we can likely expect more of this kind of news from the fintech real estate space in the coming months and perhaps throughout 2025.
Do you know a proptech startup in trouble? Contact Mary Ann at maryann@techcrunch.com or via Signal at 408.204.3036 or Marina.temkin at techcrunch.com.
This story was updated after publication on Jan. 18 to clarify the type of sale reportedly under discussion to complete Divvy.
