Numerous proptech startups, which originated and received funding during a period of low-interest rates, are currently facing significant challenges. Investments in U.S.-based real estate startups have dropped from $11.1 billion in 2021 to $3.7 billion last year, based on PitchBook data, leading some to sell themselves while others are shutting down.
The latest casualties in this environment are two notable examples of the struggles faced due to challenging interest rates and a prolonged slowdown in fintech funding within the real estate industry.
Rent-to-own proptech startup Divvy Homes is undergoing a fire sale acquisition by Maymont Homes, a Charleston, South Carolina-based company owned by Brookfield Properties, as reported by Fast Company last week.
EasyKnock suddenly closed down, as reported by NPR last month. This closure followed legal actions against the proptech company and an FTC consumer alert regarding its controversial sale-leaseback models.
While Divvy declined to comment, sources confirmed that the company is in talks with Brookfield and is close to finalizing a purchase agreement. The company disputes that the acquisition is a fire sale but has not disclosed the purchase price, leaving uncertainty regarding whether it is a bargain or a significant investment.
Divvy’s struggles were evident in 2022 with staff layoffs and further layoffs throughout 2023. Despite its initial success and high valuation, the company faced significant challenges as interest rates rose, impacting its ability to sustain operations.
EasyKnock, founded in 2016, faced similar challenges due to high interest rates, debt obligations, and legal issues related to its business practices.
With ongoing difficulties in securing funding and operating in a high-interest rate environment, the real estate fintech sector may experience further setbacks in the months ahead.
For any information about proptech startups facing challenges, you can contact Mary Ann at maryann@techcrunch.com or Marina.temkin at techcrunch.com via Signal at 408.204.3036.
