Once high-flying proptech startups Divvy Homes and EasyKnock are the latest to struggle

Many proptech startups, born and funded through the low-interest-rate heydays, are within the throes of wrestle. With investments into U.S.-based actual property startups falling from $11.1 billion in 2021 to $3.7 billion final yr, in accordance with PitchBook knowledge, some are promoting themselves off, whereas others are closing store.

The 2 most up-to-date examples are the most recent casualties of a difficult rate of interest atmosphere and the years-long slowdown in real estate fintech funding.

Hire-to-own proptech startup Divvy Properties is being acquired in a fireplace sale by Charleston, South Carolina-based Maymont Properties, Quick Firm reported final week. Maymont is a division of Brookfield Properties. 

EasyKnock abruptly shut down, NPR reported final month. This closure adopted several lawsuits filed against the proptech company and an FTC consumer alert about its controversial sale-leaseback fashions, which concerned shopping for properties from the homeowners and concurrently leasing the properties again to them.

Whereas 9-year-old Divvy declined remark, a supply aware of the matter confirmed to TechCrunch that Divvy is having conversations with Brookfield and is “near signing a purchase order settlement.” This particular person disputed that the acquisition was a fireplace sale. Nevertheless, neither the corporate nor the supply shared how a lot Brookfield might pay for Divvy, so it’s not but clear if the value is a discount or a boon.

Its sale, fireplace or not, isn’t fully a shock. Indicators of hassle started showing at Divvy in 2022, when the corporate started shedding employees. By November 2023, Divvy had carried out its third layoff in a yr’s time.

The once-buzzy startup had raised greater than $700 million in debt and fairness from well-known traders comparable to Tiger International Administration, GGV Capital, and Andreessen Horowitz (a16z), amongst others. Divvy’s final identified funding occurred in August 2021 — a $200 million Series D funding led by Tiger International Administration and Caffeinated Capital at a $2 billion valuation. The Sequence D spherical was introduced simply six months after a $110 million Series C. Divvy Properties’ final identified valuation was $2.3 billion in 2021, in accordance with PitchBook.

EasyKnock, a startup that billed itself as the primary tech-enabled residential sale-leaseback supplier, was based in 2016 and had raised $455 million in funding from backers, together with Blumberg Capital, QED Traders, and Northwestern Mutual’s company enterprise arm, in accordance with PitchBook knowledge. Roughly $200 million of that capital was in a type of debt that allowed the corporate to purchase the properties, in accordance with an individual aware of the startup.

So what went fallacious?

In its heyday, Divvy Properties claimed to be totally different from different actual property tech corporations as a result of it labored with renters who needed to turn into householders by shopping for the house they needed and renting it again to them for 3 years whereas they constructed “the financial savings wanted to personal it themselves,” it mentioned.

However the Federal Reserve started elevating rates of interest in 2022 on a mission to curb inflation. For corporations like Divvy Properties, which bought properties as a part of its enterprise mannequin, excessive charges have been devastating, limiting its potential to buy properties and earn money off these buys.

EasyKnock’s enterprise mannequin additionally concerned shopping for properties and renting them. However its association attracted householders with poor credit score scores as a result of it gave them entry to fast money, together with the choice to repurchase the house at a future date.

Excessive rates of interest additionally harm it, because it took on debt to finance its operations, sources aware of the corporate advised TechCrunch. However EasyKnock had extra issues. Greater than two dozen lawsuits were filed against EasyKnocks, and Michigan attorney general alleged that the corporate used “deceptive practices” by buying properties from these in monetary stress at low costs after which charging them excessive rents. 

In accordance with our sources, EasyKnock was bancrupt ​​when it shut down, overburdened by debt. 

And with rates of interest nonetheless comparatively excessive, and funding nonetheless troublesome to come back by, we will doubtless count on extra of this kind of information from the actual property fintech house within the coming months and maybe for all of 2025.

Are you conscious of a proptech startup in hassle? Contact Mary Ann at [email protected] or by way of Sign at 408.204.3036 or Marina.temkin at techcrunch.com.