From Divvy Homes' layoff to employee ownership option, the hottest Fintech news of the week

From Divvy Homes' layoff to employee ownership option, the hottest Fintech news of the week

The Interchange is back to take a 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, EEI has done extensive research to determine what the company should be doing with the company.

Last week, I reported on Divvy Homes' third round of layoffs in a year's time. The latest casualty was 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 help in its mission to help more Americans move from renters to [home]owners. I then covered Series C, the $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, the markets were tight and people were still buying homes. Despite the uncertainty surrounding the COVID-19 outbreak, Divvy was initially unsure about how it 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 managed to raise another $200 million, just six months later, at an estimated $2.3 billion valuation.

More people were putting their homes on the market or looking to buy a home because mortgage rates had doubled. For a company like Divvy, whose business model involves purchasing homes and then letting people aiming to build equity, it was not a positive development.

The company likely had to charge more in rent to cover the mortgages it had taken out as a result of the rising interest rates. 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 story, he said. The company let down more employees in February 2023. And last week, I reported on it laying off 94 employees, or about half its staff. While mortgage interest rates are currently at their highest levels in more than two decades, it is not a surprise given that mortgage interest rates have surged significantly in the past few decades.

The company declined to comment after I reached out, with my email to executives and the media relations team going unanswered.

A letter viewed by TechCrunch said that the job cuts affected people working in a variety 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 real estate sector, or proptech sector, has experienced a major uptick in recent times, as mortgage interest rates have surged. Layoffs have cropped up at publicly traded companies such as Opendoor, Compass and Redfin, and startups like and Homeward. In August 2022, Reali announced it had begun a shutdown and would be laying off most of its workforce by the next month.

Real estate is a fascinating area since we're all affected by it in one or another. While it's not good to see startups laying off or shutting down, it's part of the cycle the industry continues to go through. There are always ups and downs. There's never a dull day when covering this space. A small business may need to shift to a new owner, as there are many reasons for this. While startups, such as Teamshares, have a hold on acquiring companies that don't have succession plans, they may not always be what a company needs.

The startup, Common Trust, offers an employee ownership buyout option. The company has raised $2.6 million in seed funding from Crossbeam Venture Partners in a three-way round.

In 2022, Zoe Schlag and Derek Razo founded 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 core of Common Trust is a unique legal vehicle that allows small businesses to exit with independence while also being able to exit with a perpetual purpose trust.

Schlag said in an email interview that he would not comment on the results of the interview. Zack Whittaker reported that there was no evidence of a cyberattack, causing 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 daylong outage, the payments tech giant said that the outage was caused by a DNS issue. The global protocol that converts human-readable web addresses to IP addresses, allowing computers to locate 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 hiked interest rates from lows in COVID-era lows to the highest levels for a generation. 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 will launch a new private bank focused on startup. 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 start-up. He details 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. How did Charlie Javice convince JPMorgan to pay $175 million in back taxes?

Deel's decision to cut off high-risk trading sites is a departure from a previously established offering of high-risk trading platforms.

Alza emerges from stealth to offer affordable and inclusive financial tools to immigrants.

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