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

Many proptech startups, born and funded during the low-interest-rate heyday, are struggling. Investments in US-based real estate startups fell from $11.1 billion in 2021 to $3.7 billion last year, according to Pitchbook data, as some are selling themselves, while others are closing up shop.

Two of the most recent examples are the challenging interest rate environment and recent casualties over the years A slowdown in real estate fintech funding.

Charleston, South Carolina-based Maymont Homes is acquiring rent-to-own proptech startup Divi Homes in a fire sale by Fast Company. informed last week. Maymont is a division of Brookfield Properties.

EasyKnock shut down suddenly, NPR informed Following the shutdown last month Several lawsuits have been filed against the Proptech company And one FTC Consumer Alert about its controversial sale-leaseback models, which involved buying homes from owners while simultaneously renting them back.

While 9-year-old Divi declined to comment, a source familiar with the matter confirmed to TechCrunch that Divi is in talks with Brookfield and is “close to signing a purchase agreement.” The man disputed that the acquisition was a fire sale. However, neither the company nor the source shared how much Brookfield could pay for the division, so it’s not yet clear whether the price is a bargain or a boon.

Its sale, fire or not, is not entirely a shock. Signs of trouble began to appear at Divi in ​​2022, when the company began laying off staff. By November 2023, Divi was retrenched for the third time in a year.

The once booming startup had raised over $700 million in debt and equity from notable investors such as Tiger Global Management, GGV Capital and Andreessen Horowitz (a16z). Divi’s last known funding was in August 2021 — $200 Million Series D Funding $2 billion valuation led by Tiger Global Management and Caffeinated Capital. The Series D round was announced just six months later $110 million Series C. The last known valuation of Dewey Homes was $2.3 billion in 2021, according to Pitchbook.

EasyKnock, a startup that bills itself as the first tech-enabled residential sale-leaseback provider, was founded in 2016 and has raised $455 million in funding from backers including Bloomberg Capital, QED Investors and the corporate venture arm of Northwestern Mutual, according to Pitchbook. was collected. About $200 million of the capital was in the form of debt that allowed the company to buy homes, according to a person familiar with the data 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 for three years to give them the “savings needed to own.” was made He himself,” he said.

But the Federal Reserve began raising interest rates in 2022 on a mission to curb inflation. For companies like Dewey 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 included buying and renting out homes. But its arrangement appealed to homeowners with poor credit scores because it gave them access to quick cash 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 It is alleged that the company “Deceptive practiceBy buying houses at low prices from people in financial stress and then charging high rents.

According to our sources, EasyKnock was bankrupt due to debt when it closed.

And with interest rates still relatively high, and funding still hard to come by, we can likely expect more of this kind of news from the real estate fintech space in the coming months and perhaps all of 2025.

Do you know of a struggling proptech startup? Contact Mary Ann maryann@techcrunch.com or via Signal at 408.204.3036 or Marina.temkin at techcrunch.com.