From a $2B+ valuation to round after round of layoffs
Last week, I reported on Divvy Homes’ third round of layoffs in a year’s time. 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 help in its mission to help more Americans “move from renters to [home]owners.” I then covered the company’s $110 million Series C in February of 2021.
Of course, at that time, it was a very different housing market. Interest rates were still relatively low and while markets were tight, people were still buying homes. Like most companies, Divvy was initially unsure as to how the COVID-19 pandemic would impact its business. But 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.
Fast-forward to 2022. Mortgage rates had doubled and fewer people were putting their homes on the market or looking to buy a home. For a company like Divvy, whose business model involves purchasing homes and then renting them to people aiming to build equity, it was not a positive development.
Rising interest rates meant that the company likely had to charge more in rent to cover the mortgages it had taken out. So 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 people in September 2022.
But that was just the beginning. In February 2023, the company let go of more workers. And last week, I reported on it laying off 94 employees, or about half its staff. Again, not a surprise considering that mortgage interest rates recently reached their highest levels in more than two decades.
The company declined to comment when I reached out, with my email to executives and the media relations team going unanswered.
A WARN letter viewed by TechCrunch stated that the job cuts affected people working in a wide 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 real estate tech, or proptech sector, has taken a big hit as mortgage interest rates have surged. Layoffs have abounded at both publicly traded companies such as Opendoor, Compass and Redfin and startups such as Better.com (which recently went public itself) and Homeward. Other startups didn’t survive at all. Reali announced in August 2022 it had begun a shutdown and would be laying off most of its workforce by the next month.
Real estate is a fascinating space since we’re all affected by it in one way or another. (Did you know I was a real estate reporter in a former life?!) While it’s not good to see startups laying off or shutting down, it’s unfortunately part of the cycles the industry regularly goes through. There are always ups and downs. Sometimes it’s a seller’s market. Sometimes it’s a buyer’s market. Sometimes it’s cheaper to rent. Sometimes it’s cheaper to own. Only one thing is certain: There’s never a dull day when covering this space. — Mary Ann
(opens in a new wiA new buyout option for employees
There are a number of reasons why a small business might need to transition to a new owner. And while startups, like Teamshares, have a lock on acquiring companies that don’t have succession plans, that might not always be what a company needs.
Last week I wrote about Common Trust, a startup offering an employee ownership buyout option. 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 at a company with a great corporate culture and history of helping customers.
At Common Trust’s core is a unique legal vehicle called a perpetual purpose trust that enables small businesses to exit while also remaining independent.
“Employee ownership is the most scalable approach to serve this market, preserving generational businesses and quality jobs in cities and towns across America, and can be achieved at a fraction of the cost that brokers are charging, typically 10% of the transaction,” Schlag said in an email interview. Read more. — Christine
Weekly news
As reported by Zack Whittaker: “Square said there was ‘no evidence’ a cyberattack caused an outage that left customers and small businesses unable to use the payment giant’s technology on Thursday through early Friday. The payments technology giant said in a postmortem of the daylong outage that the outage was caused by a DNS issue. DNS, or domain name system, is the global protocol that converts human-readable web addresses into IP addresses, which allow computers to find and load websites from all over the world.” More here.
In a guest post, Navan’s Michael Sindicich writes that “fintech faces a reckoning. Over the past two years, central banks have hiked 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 until the house of cards collapses.” More here.
Citizens Bank is launching a new startup-focused private bank. Mary Ann talked at length with Sam Heshmati, who joined the institution as its head of emerging VC and innovation banking in July. Heshmati had worked at First Republic Bank for more than a decade and helped launch its startup practice. He details what it was like to witness First Republic’s collapse from the inside, as well as how Citizens aims to become the “‘go to bank’ for the innovation sector.” More here.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
