Real Estate Tech Companies Continue To Get Hammered By High Mortgage Rates

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A layoff period of $2 billion or more

Last week I reported on the third round of layoffs of the year at Divvy Homes . This is the latest casualty of the property technology sector.

I first wrote about rental housing startup DV Homes in September 2019, when it announced a $43 million Series B funding round to help more Americans transition from renter [to owner] status go. Then, in February 2021, I raised the company's Series C round of $110 million.

Of course, the real estate market was very different then. Interest rates were still relatively low, and although markets were tight, people continued to buy homes. Like most businesses, Dewey was initially unsure how the COVID-19 outbreak would affect his business. But as 2020 approaches — and the world spends more time indoors than ever before — Dewey says demand will only increase. So the startup raised an additional $200 million six months later for a $2.3 billion valuation.

Fast forward to 2022. Mortgage rates have doubled and fewer people are putting their homes on the market or looking to buy a home. For a company like DV, whose business model is to rent to people who want to buy a home and grow their net worth, this was not a positive change.

Rising interest rates have forced the company to charge higher rents to cover the mortgages it takes out. So in 2022, it's no surprise that Fast Company and the New York Times have reported that DV will charge higher rents than landlords in some markets. No wonder the startup will lay off around forty people in September 2022.

But that was just the beginning. In February 2023, the company laid off more employees. Last week I announced the layoffs of 94 employees, roughly half of the workforce. Again, this is not surprising as mortgage interest rates have reached their highest level in more than two decades.

The company declined to comment when contacted, as emails sent to executives and the media relations team went unanswered.

The WARNING letter, seen by TechCrunch, says the job cuts affect people in various roles, including vice presidents of sales, compliance, human resources and communications/PR, as well as a senior recruiter, several software engineers and accounting executives.

The real estate technology, or proptech, sector has been hit hard by rising mortgage interest rates. The push has occurred at both publicly traded companies like Opendoor, Compass and Redfin, as well as startups like Better.com (itself recently gone public) and Homeward. Other startups never survived. Riley announced that it would begin layoffs in August 2022 and lay off the majority of its workforce next month.

Real estate is a wonderful place because it affects us all in one way or another. (Did you know I'm a real estate journalist?!) While it's never good to see startups downsize or close their doors, unfortunately this is one of those times the real estate industry goes through from time to time. There are always ups and downs. Sometimes it's a seller's market. Sometimes it's a buyer's market. Sometimes it is cheaper to rent. Sometimes it is cheaper to get. Only one thing is certain: you never get bored here. - Mary Ann

(A new wi is opened with the possibility to buy a new employee .

There are many reasons why a small business can change hands. While startups like Teamshares can't afford businesses without a succession plan, that's not always what a business needs.

Last week I wrote about Common Trust, a startup offering employee buyouts. The company recently raised $2.6 million in seed funding in a round led by Crossbeam Venture Partners.

Zoe Schlag and Derek Razo founded the company in 2022 with the idea that employees often want to stay with a company with a great company culture and history of helping customers.

A blanket trust relies on a special legal mechanism called a perpetual trust, which allows small businesses to operate freely.

"Employee ownership is a highly scalable approach to serving this market, preserving traditional businesses and quality jobs in America's cities and towns, and can be achieved at less than 10% of the cost of operating brokerages," Schlag said. said. . he said in an email interview. Learn more. - Christine

Weekly News

As Zach Whittar reports: Square said there was "no evidence" that the cyber attack prevented customers and small businesses from using the payments giant's technology from Thursday to Friday. The payments technology giant said in a statement after today's outage that it was caused by a DNS issue. DNS, or Domain Name System, is a global protocol that translates human-readable web addresses into IP addresses, enabling computers to search for and download web pages from around the world. More details here.

In a guest post, Michael Sindicic from Navan writes: “Fintex is waiting for payment. Over the past two years, central banks have raised interest rates from Covid-era lows to generational highs. Today, economic models that have won the favor of consumers are sometimes shaken. It's only a matter of time before the house of cards comes crashing down. » More details here.

Citizen Bank is to launch a new private bank focusing on start-ups. Mary Ann has a long history of working with Sam Heshmati, who joined the firm in July as head of venture capital and innovation banking. Heshmati has been with First Republic Bank for more than a decade and helped launch its startup practice. He describes what it was like to see the collapse of the First Republic from the inside and how citizens tried to "finance" the creative sector. More details here.

Other things we read :-

How did Charlie Javis manage to pay JPMorgan $175 million?

Dell changes terms of service and disables high-risk commercial sites

Monzo, the $4.5 billion UK digital bank, has launched an investment feature

Fountain offers integration with affiliate payment platform

All products are integrated with Visa Direct and allow instant payments.

Sixth Division announced BNPL program for businesses seeking working capital

Chase Payment Solutions partners with Gusto to improve payments

Fundraising and mergers and acquisitions

Featured on TechCrunch.

Perfios raises $229 million for real-time credit underwriting solutions

Swan receives $40 million to bring domestic banking to Europe

Parallax takes the stress out of cross-border payments.

Alza comes out of hiding to provide affordable and comprehensive financial tools to refugees

You've seen it elsewhere.

The price of home insurance has reached $1 billion

Treasury4 has raised $20 million in new capital

CLARA Analytics Raises $24M in Series C Funding

EXCLUSIVE: a16z Leads $17M Deal in Bond Trading

Software development startup Caliza raises $5.3 million and launches in Brazil

N5 is a fundraiser.

Bahar Activator will get future capital to invest

Discover the FinTech Disruption 2023 ranking

Learn more about the fintech scene as we cover Web3, banking and more at TechCrunch Disrupt 2023 in San Francisco September 19-21. Last minute passes are always available. Save 15% with code INTERCHANGE. Register now !

Photo credit: Bryce Durbin 

Technical analysis shows markets have levels of risk – be careful | Sven Heinrich