Yesterday’s thriving proptech startups, Divvy Homes and EasyKnock brace for turbulence. According to PitchBook, investments in American real estate startups saw a dip from $11.1 billion in 2021 to a mere $3.7 billion in 2022. Amidst this downturn, some startups are seeking acquisition while others shut down.
The recent struggles of Divvy Homes and EasyKnock are signs of a taxing interest rate environment and a continual slowdown in real estate fintech financing. Charleston-based Maymont Homes acquires Divvy Homes, whilst EasyKnock faces abrupt closure following multiple lawsuits and a consumer alert from FTC regarding their controversial sale-leaseback models.
As per a TechCrunch source, Divvy is on the verge of signing a purchase agreement with Brookfield, dismissing the concept of it being a pure fire sale. The price Brookfield is willing to offer remains a mystery, keeping their acquisition strategy under speculation.
The sale of Divvy isn’t shocking as the company started showing signs of trouble in 2022, followed by multiple layoffs. However, it managed to raise $700 million in debt and equity from renowned investors and boasted a valuation of $2.3 billion in 2021.
EasyKnock, marketed as the pioneer tech-enabled residential sale-leaseback provider, managed to raise $455 million in funding. This startup allowed homeowners immediate access to cash with an option to repurchase their homes in the future which attracted individuals with poor credit scores.
Unfortunately, challenging interest rates and a heap of debt sidelined its operation. Moreover, multiple lawsuits and allegations of employing “deceptive practices” led to its downfall, leaving the firm insolvent.
With high interest rates still in play and difficulty securing funding, the real estate fintech industry imperatively braces for challenges in the near future.
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