The $1 billion acquisition of rent-to-own startup Divvy Properties, which was introduced Wednesday, is anticipated to depart some shareholders and not using a payout, in keeping with sources aware of the deal.
The phrases — and Divvy’s journey from buzzy startup to acquisition goal — displays the rollercoaster experience the proptech business 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 akin to Tiger World Administration, 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 business that has had a string of shutdowns and bankruptcies.
Nevertheless, it’s a loss for some shareholders, in keeping 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. Nevertheless, after repaying its excellent indebtedness, transaction prices, and liquidation choice to most well-liked shareholders, we sadly estimate that neither widespread shareholders nor holders of the Collection FF most well-liked inventory will obtain any consideration,” in keeping with the letter, which was despatched to shareholders, former workers, and “Divvy supporters.”
FF most well-liked inventory, also called Founders Most popular Inventory, is a sort of inventory that’s issued to founders of an organization. The legislation agency Cooley defines the shares as being issued to founders “on the time of incorporation to be able to facilitate gross sales of inventory by founders in reference to future fairness financings.”
TechCrunch has reached out to Hefets and Divvy Properties for remark and can replace the article with any response.
One other supply advised TechCrunch that fairness holders “bought zero’d” so “founders, workers 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 during which it labored with renters who needed to turn out to be owners by shopping for the house they needed and renting it again to them for 3 years whereas they constructed “the financial savings wanted to personal it themselves,” it mentioned.
The corporate 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 Collection D funding led by Tiger World Administration and Caffeinated Capital. The Collection D spherical was introduced simply six months after a $110 million Collection C.
Hefets additionally shared within the letter the “choice to promote wasn’t straightforward” and “got here after an intensive assessment of Divvy’s strategic alternate options … and with vital deliberation round our choices.”
She mentioned the transfer adopted “years of combating troublesome market situations, together with rising rates of interest, and making as many value cuts as potential.”
As the corporate appeared into what lay forward in 2025, it determined the easiest way ahead was to promote its “portfolio of houses now and return as a lot capital as potential 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…Whereas I’m not happy with the monetary consequence, I’m happy with the influence we had on our clients’ lives,” Hefets added.
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