Summary:
Divvy Homes is being acquired by Maymont Homes, marking a significant decline from its previous $2 billion valuation.
The company aimed to help families with a rent-to-own model, but faced challenges due to rising mortgage rates.
Three rounds of layoffs have occurred, with most employees now laid off, leading to significant investor and employee equity losses.
Divvy's struggles reflect broader issues in the proptech sector, amid rising borrowing costs and declining venture capital.
To return to pre-pandemic housing affordability, drastic changes in income, home prices, or mortgage rates are necessary.
Divvy Homes, once a promising rent-to-own startup, is undergoing a dramatic acquisition by Maymont Homes, a division of Brookfield Properties. This acquisition reflects a significant decline for the San Francisco-based company, which was previously valued at nearly $2 billion and supported by major investors like Andreessen Horowitz and Tiger Global Management.
Founded in 2017, Divvy Homes aimed to assist families struggling to enter traditional homeownership through a rent-to-own model. Customers would select a home that Divvy purchased, allowing them to rent while saving towards a future down payment. Despite initial success, including raising over $400 million in venture capital and achieving over $100 million in annual revenue by 2022, the company faced operational challenges as mortgage rates surged in 2022.
The increase in rates made monthly payments unaffordable for new renters, leading to a surge in customer complaints and ultimately resulting in three rounds of layoffs. An insider revealed that nearly all employees have been laid off, stating it’s a “bloodbath for investors and employee equity.” The insider further explained that the pricing strategy became untenable, as Divvy could no longer predict future home prices necessary for their model.
Divvy Homes' collapse reflects broader issues in the proptech sector, where rising borrowing costs and decreasing venture capital funding have left many startups struggling. According to an analysis by Fannie Mae, returning to pre-pandemic housing affordability levels would require drastic changes in income, home prices, or mortgage rates.
As the housing market continues to evolve, the question remains whether Divvy Homes can recover or if this acquisition signals the end of its rent-to-own business model.
Comments