The proptech startup landscape is facing significant challenges, with many companies struggling to stay afloat amid rising interest rates and a decline in funding. According to PitchBook data, investments into U.S.-based real estate startups have plummeted from $11.1 billion in 2021 to $3.7 billion last year. This downturn has led to a wave of consolidations and shutdowns, with the latest casualties being rent-to-own proptech startup Divvy Homes and sale-leaseback provider EasyKnock.

Divvy Homes, which had raised over $700 million in debt and equity from prominent investors such as Tiger Global Management, GGV Capital, and Andreessen Horowitz, is being acquired by Charleston, South Carolina-based Maymont Homes, a division of Brookfield Properties. While the terms of the acquisition remain undisclosed, a source familiar with the matter confirmed to TechCrunch that Divvy is "close to signing a purchase agreement." This development follows a series of layoffs at Divvy, with the company conducting its third layoff in a year's time by November 2023.

EasyKnock, on the other hand, has abruptly shut down, following several lawsuits filed against the company and an FTC consumer alert about its controversial sale-leaseback models. The startup, which had raised $455 million in funding, had been accused of using "deceptive practices" by purchasing homes from financially strained individuals at low prices and then charging them high rents. Sources familiar with the company told TechCrunch that EasyKnock was insolvent when it shut down, overburdened by debt.

The struggles faced by Divvy Homes and EasyKnock can be attributed to the challenging interest rate environment, which has limited their ability to purchase homes and make money off those buys. The Federal Reserve's decision to raise interest rates in 2022 to curb inflation has had a devastating impact on companies like Divvy, which rely on purchasing homes as part of their business model. EasyKnock's business model, which involved buying homes and renting them back to homeowners, was also severely affected by high interest rates, as it took on debt to finance its operations.

The decline of these proptech startups serves as a warning sign for the industry, which is likely to face more consolidations and shutdowns in the coming months. With interest rates still relatively high and funding remaining difficult to come by, the real estate fintech space is expected to continue struggling throughout 2025. As the industry navigates this challenging landscape, it remains to be seen which proptech startups will be able to adapt and thrive, and which will succumb to the pressures of the market.

If you have information about a proptech startup in trouble, you can contact Mary Ann at maryann@techcrunch.com or via Signal at 408.204.3036, or Marina Temkin at techcrunch.com.