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

Many proptech startups, born and funded in the heyday of low-interest rates, are struggling. Investment in U.S.-based real estate startups has fallen from $11.1 billion in 2021 to $3.7 billion last year, according to data from PitchBook, as some are selling themselves, while others are closing up shop.

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

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

EasyKnock Closes Suddenly, NPR Report Following this off last month A number of lawsuits have been filed against the Proptech company and one FTC Consumer Alert About its controversial sale-leaseback model, which involves buying homes from owners and simultaneously returning the homes to them.

While 9-year-old DV declined to comment, a source familiar with the matter confirmed to TechCrunch that DV is in talks with Brookfield and is “close to signing a purchase agreement.” This person disputed that the acquisition was a fire sale. However, neither the company nor the sources shared how much Brookfield could pay for the Div, so it’s still unclear whether the price is a bargain or a bounty.

Its sales, fire or not, aren’t entirely a shock. DV began to show signs of trouble in 2022, when the company began laying off workers. By November 2023, DV had conducted its third layoff in a year.

The once talked-about startup has raised more than $700 million in debt and equity from well-known investors such as Tiger Global Management, GGV Capital and Andreessen Horowitz (a16z). DV’s last known funding was in August 2021 — A $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 A $110 million Series C. The last known value of DV Homes was $2.3 billion in 2021, according to Pitchbook.

EasyKnock, a startup that bills itself as the first technology-enabled residential sale-leaseback provider, was founded in 2016 and raised $455 million in funding from backers including Bloomberg Capital, QD Investors and the corporate venture arm of Northwestern Mutual, according to PitchBock. About $200 million of that capital was in the form of debt, according to a person familiar with the startup Allows the company to buy the houses.

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 buy the home they wanted and rented it to them for three years while they “built up the necessary savings.” It’s ourselves,” it said.

But the Federal Reserve began raising interest rates in 2022 in an effort to control inflation. For companies like Divvy Homes, which bought homes as part of its business model, high rates were devastating, limiting the ability to buy homes and make money from those purchases.

EasyKnock’s business model also involves buying and renting houses. But its arrangement attracted homeowners with poor credit scores because it gave them quick access to cash, along with the option to repurchase the home at a future date.

High interest rates 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 that Two dozen cases have been filed EasyKnocks, and Attorney General of Michigan Alleged that the company used “Fraudulent practices“Buying cheap houses from people under financial pressure and then charging high rents.

According to our sources, EasyKnok was insolvent at the time of its closure due to debt pressure.

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

Are you aware of a proptech startup in trouble? Contact Mary Ann maryann@techcrunch.com or via Signal at 408.204.3036 or Marina.temkin at techcrunch.com.