Proptech Shake-Up: Divvy Homes and EasyKnock Face New Challenges in a Shifting Market
The proptech sector, once thriving during the era of low interest rates, is now facing significant challenges. A stark decline in investments for U.S.-based real estate startups—from $11.1 billion in 2021 to just $3.7 billion last year—has left many companies struggling to survive. In this turbulent environment, some startups are opting for acquisitions while others are shutting down completely.
Recent Struggles in the Proptech Market
Two notable examples exemplifying this trend are the rent-to-own startup Divvy Homes and the residential sale-leaseback provider EasyKnock.
Divvy Homes Acquisition
According to Fast Company, Divvy Homes is set to be acquired by Maymont Homes, a Charleston-based division of Brookfield Properties. While Divvy declined to comment on the acquisition, reports suggest that discussions are well underway, and a purchase agreement could be imminent. However, the financial details of the deal remain undisclosed, leaving uncertainty about whether this acquisition represents a bargain for Brookfield.
- Background: Divvy Homes has raised over $700 million in funding from notable investors like Tiger Global Management and Andreessen Horowitz.
- Decline: The startup had to conduct multiple layoffs in 2023, signaling underlying issues within the company.
EasyKnock’s Sudden Shutdown
In contrast, EasyKnock recently ceased operations following a series of lawsuits and an FTC consumer alert regarding its sale-leaseback models. The company, which had raised approximately $455 million since its inception in 2016, struggled due to high debt levels and legal challenges.
- Issues Faced: EasyKnock’s business targeted homeowners with poor credit scores, offering them quick cash while allowing them the option to buy back their homes later.
- Legal Troubles: The company faced over two dozen lawsuits alleging deceptive practices and was reportedly insolvent at the time of its closure.
The Impact of Rising Interest Rates
The primary factor contributing to the struggles faced by both Divvy Homes and EasyKnock is the rising interest rates initiated by the Federal Reserve in 2022. These higher rates have severely limited their ability to purchase homes and maintain profitable operations.
As the proptech landscape continues to evolve amid these economic challenges, it is likely that we will see more startups facing similar fates throughout 2025. For those in the real estate fintech space, the road ahead may be fraught with difficulties.
Staying Informed
If you know of other proptech startups facing challenges, please reach out to Mary Ann or Marina Temkin for more insights.
This article was updated on January 18 to clarify the nature of the sale involving Divvy Homes.
