GoKawiilThe harsh realities of the property market have left the real estate tech sector grappling as the market continues to witness skyrocketing mortgage rates. While rising rates have been a state of concern for other verticals, too, the gnawing impact on the RealTech companies looks bothersome.
The story of Divvy Homes, a once-promising rent-to-own startup, marks the stark reality that companies in this space are facing. Back in September 2019,
Divvy Homes made headlines when it secured a substantial $43 million Series B round on its mission of helping Americans transform into homeowners from renters.
Luck favored the company initially, as it continued to be on track till February 2021, when it successfully closed a $110 million Series C funding round.
Divvy Homes Run Out Of Luck In 2021
A dramatic shift in the housing market threw the company off its growth trajectory. With mortgage rates doubling and the sales of homes dropping, the future of Divvy looked uncertain. The core business model of this startup involved purchasing homes and renting them to individuals to build equity. However, with rising interest rates, they had to charge higher rates from renters to cover the additional mortgage expenses.
A WARN letter revealed that the company slashed jobs across different roles, including vice presidents of sales, human resources, compliance, account executives, and software engineers.
The very next year, in 2022, Divvy found itself charging higher rates compared to traditional landlords in certain markets. This development sparked concern among the industry players.
The economic fallout of the pandemic further intensified the crisis. The demand and supply of inventory in the housing market were significantly disrupted.
To cope with the economic struggles, Divvy Homes started its initial phase of layoffs. They let go of 40 employees in September 2022, which marked the start of economic turmoil for the company.
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