Another day, another real estate tech startup raises money.
Well, not really. But that’s what it feels like.
Today, Divvy Homes announced a $43M Series B round to help in its mission to help more Americans “move from renters to [home]owners.”
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Divvy differentiates itself from the slew of real estate tech companies claiming to be digitizing “the archaic, data-heavy processes buyers encounter along the way” by taking things “further.” The company works with renters who want to become homeowners by buying the home they want and renting it back to them for three years “while [they build] the savings needed to own it themselves.”
Every company has a mission. Divvy claims to be working to “create a world where every person can own their forever home;” or, essentially, it wants to make homeownership more accessible.
The startup’s combined equity and debt raised since its inception in 2017 is now “nearing $200 million,” it said. Divvy also raised $10 million in an a16z-led Series A last October.
The San Francisco-based company also had previously raised more than $120 million in a debt facility from Cross River Bank + Atalaya. It started off as a $20M debt facility raised along with the company’s Series A in 2018, but increased over the last year as Divvy has “proven” its performance, according to the company.
New investors GIC, a Singaporean sovereign wealth fund, and homebuilder Lennar (via its venture arm) joined existing investors Andreessen Horowitz (a16z), Caffeinated Capital, and Affirm CEO Max Levchin in putting money into the latest round.
Investors are naturally bullish.
In a statement, Alex Rampell, a general partner at Andreessen Horowitz, said a16z was “confident” that Divvy would “continue causing meaningful disruption in the real estate space, given its unique business model and real impact on wealth creation in America.”
The company saw its revenue grow 10 times in August year-over-year, according to CEO and co-founder Adena Hefets. It’s also grown its headcount by five times to 40 compared to the same time last year. Divvy makes money off of “market rate rent,” and claims to charge no hidden fees or impose “extra costs.”
Divvy plans to use the new capital to (of course) do more hiring, increase investment in technology and purchase more homes.
“Proptech is flooded with startups targeting high net-worth individuals, but Divvy’s model addresses the needs of the vast majority of Americans, often ignored by Silicon Valley,” said Levchin, founder of HVF, where Hefets and co-founder Brian Ma incubated Divvy.
How It Works
Buying a home with Divvy starts with a five-minute application that results in an approved home-buying budget and an introduction to a real estate agent.
Once found, Divvy purchases the property, while the renter contributes an initial 2 percent of the home value. About 25 percent of each subsequent rent payment goes toward saving for a traditional mortgage, so the new residents have a down payment to buy their home in three years. If the renters change their mind, they can just get cashed out for their savings. Or, if they want to buy it faster, they can speed up the process.
The company claims to have helped customers save, on average, more than $5,000 per household.
Divvy currently operates in Atlanta, Ga.; Cleveland, OH; and Memphis, Tn; and will expand into new markets in the future.
“We’re looking at metros generally in Tier 2 and 3 cities where we think we could have a large impact on homeownership,” Hefets said.
We’ve been paying attention to this space, which has seen some massive funding rounds from the likes of Knock and Compass this year alone. In July, we covered Fifth Wall Ventures’ raising $503 million for its second fund to invest almost exclusively in real estate tech companies. Buying a home appears to still be the American dream for many. And as long as that’s the case, there will likely be demand for services that companies like Divvy offer.
Blog Roll Illustration: Li-Anne Dias