The $1 billion acquisition of rent-to-own startup Divvy Homes, which was introduced Wednesday, is predicted to go away some shareholders and not using a payout, in line with sources conversant in the deal.
The phrases — and Divvy’s journey from buzzy startup to acquisition goal — displays the rollercoaster journey the proptech trade has endured over the previous decade.
The San Francisco-based startup, based in 2016, had raised greater than $700 million in debt and fairness from well-known traders similar to Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z), amongst others. By 2021, the corporate was valued at $2.3 billion.
And whereas the Brookfield Properties buy of Divvy for $1 billion was at half of its peak valuation, the acquisition might nonetheless be thought-about a win in an trade that has had a string of shutdowns and bankruptcies.
However, it’s a loss for some shareholders, in line with a letter from Divvy CEO and co-founder Adena Hefets, which was seen by TechCrunch.
“If the transaction closes, Divvy will promote considerably all of its belongings, specifically its dwelling portfolio and model, to Brookfield for roughly $1 billion. However, after repaying its excellent indebtedness, transaction prices, and liquidation choice to most popular shareholders, we sadly estimate that neither widespread shareholders nor holders of the Series FF most popular inventory will obtain any consideration,” in line with the letter, which was despatched to shareholders, former staff, and “Divvy supporters.”
FF most popular inventory, often known as Founders Preferred Stock, is a sort of inventory that’s issued to founders of an organization. The regulation agency Cooley defines the shares as being issued to founders “on the time of incorporation with a purpose to facilitate gross sales of inventory by founders in reference to future fairness financings.”
TechCrunch has reached out to Hefets and Divvy Homes for remark and can replace the article with any response.
Another supply informed TechCrunch that fairness holders “bought zero’d” so “founders, staff and VCs” will get “nothing” from the sale. The identification of the supply, who requested to stay nameless, has been verified by TechCrunch.
Divvy operated a rent-to-own mannequin through which it labored with renters who wished to turn into owners by shopping for the house they wished and renting it again to them for 3 years whereas they constructed “the financial savings wanted to personal it themselves,” it stated.
The firm bumped into some hiccups when mortgage rates of interest started to surge in 2022, main it to conduct three recognized rounds of layoffs in a yr’s time. Divvy’s final recognized funding occurred in August 2021 — a $200 million Series D funding led by Tiger Global Management and Caffeinated Capital. The Series D spherical was introduced simply six months after a $110 million Series C.
Hefets additionally shared within the letter the “resolution to promote wasn’t straightforward” and “got here after an intensive evaluation of Divvy’s strategic alternate options … and with vital deliberation round our choices.”
She stated the transfer adopted “years of combating troublesome market situations, together with rising rates of interest, and making as many price cuts as doable.”
As the corporate seemed into what lay forward in 2025, it determined the easiest way ahead was to promote its “portfolio of properties now and return as a lot capital as doable to shareholders.”
“With nearly a decade of pouring myself into this firm, and believing on this mission, this was not the ending I had hoped for…While I’m not happy with the monetary end result, I’m happy with the influence we had on our clients’ lives,” Hefets added.
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