We're back to The Interchange, where we look at the hottest Fintech news of the past week. This week, we take a look at one startup's layoff, another offering an employee ownership buyout option, and much more. From a $2B+ valuation to round after round of layoffs, it takes a close look at how the company's performance has impacted the company's performance.
Last week, I reported on the third round of layoffs in a year's time at Divvy Homes. It was the latest casualty in a beaten down real estate tech sector.
I first wrote about rent-to-own startup Divvy Homes in September 2019 when it announced a $43 million Series B round to support its mission to help more Americans move from renters to [home]owners. I then learned about the company's $110 million Series C deal in February of 2021.
At that time, it was a very different housing market. While interest rates were relatively low, markets were tight and people were still buying homes. As a result, Divvy was unsure about how the COVID-19 pandemic would affect its business. As 2020 went on - and the whole world spent more time at home than ever - Divvy said it only saw increased demand. So much so that the startup raised another $200 million just six months later, a valuation of an estimated $2.3 billion.
The number of people putting their homes on the market had doubled and fewer people were looking to buy a home. For a startup like Divvy, whose business involves buying homes and then renting them to people aiming to build equity, it was not a positive development.
The rise of interest rates meant the company had to charge more rent to cover the mortgages it had taken out. It's no surprise that in 2022, both Fast Company and the New York Times reported that Divvy was supposedly charging higher rents than other landlords in some markets. It's also not shocking that the startup laid off about 40 employees in September 2022.
But that was the beginning of the beginning of the story, he said. In February 2023, the company let down more workers. And last week, I reported on its layoffs of 94 employees, or about half its staff. As mortgage interest rates have gone up in more than two decades, it's not a surprise given that mortgage interest rates have reached their highest levels for more than two decades.
My email to executives and the media relations team goes unanswered, according to a company spokeswoman who declined to comment when I reached out.
A WARN letter viewed by TechCrunch said the job cuts affected people working in a broad range of roles, including the vice presidents of sales, compliance, people, and comms/PR, as well as a senior recruiter, a number of software engineers and account executives.
The rise in mortgage interest rates has had a significant impact on the real estate sector, which has become a key player in the real estate industry. Layoffs have risen at publicly traded companies like Opendoor, Compass, Redfin, and startups like Better.com and Homeward. In August 2022, Reali announced that it had started a shut down and would be laying off most of its workforce by the next month.
Real estate is a fascinating area because we are all affected in one way or another. While it's not good to see startups laying off or shutting down, it's unfortunate that the industry is still under its current cycle. There is always a downfall and ups and downs. There's always a dull day when covering this space. Many small businesses may need to transition to a new owner, which can happen in a variety of ways. While startups, like Teamshares, have a tight grip on acquiring firms that don't have succession plans, that may not always be what a company needs.
Last week I wrote about Common Trust, a startup that offers an employee ownership buyout option. Crossbeam Venture Partners has raised $2.6 million in seed funding from a round co-chaired by the company.
In 2022, Zoe Schlag and Derek Razo established the company with the idea that employees often want to stay at a company with a great corporate culture and history of helping customers.
The foundation of Common Trust is a unique legal vehicle, called a perpetual purpose trust that allows small businesses to exit while also remaining independent.
Schlag said he would not comment further on his position in the email interview. No evidence of a cyberattack caused an outage that left customers and small businesses unable to use the payment giant's technology on Thursday through Friday. In a postmortem of the day-long outage, the payments tech giant said that the outage was caused by a DNS issue. The global protocol known as DNS is the global protocol that transforms human-readable web addresses into IP addresses, enabling computers to find and load websites from all corners of the globe. In a guest post, Navan's Michael Sindicich notes that 'fintech faces a reckoning. Central banks have raised interest rates from their COVID-era lows to the highest levels for a generation. And now the business models that won consumers' affection look increasingly tenuous. It's only a matter of time before the house of cards collapses. Citizens Bank is launching a new private bank focused on startups. Mary Ann spoke with Sam Heshmati, who joined the institution in July as head of emerging VC and innovation banking. Heshmati had worked at First Republic Bank for more than a decade and helped launch its startup practice. As he describes, he describes how it was like to witness First Republic's collapse from the inside, and how Citizens aims to become the 'go to bank' for the innovation sector. What exactly did Charlie Javice do to get JPMorgan to pay $175 million?
Deel's new terms of service have affected high-risk trading sites, cutting off high-risk trading sites.
Alza emerges from stealth and offers affordable and inclusive financial aid to immigrants.
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