Startup Sold for $1 Billion: Founder's Unexpected Reaction

TechCrunch Fintech: Weekly Update

Greetings from TechCrunch Fintech! This week’s coverage focuses on the details surrounding the Divvy Homes acquisition, a new offering from Ramp, significant funding rounds, and additional industry news.

Divvy Homes Sale and Industry Impact

The recent sale of Divvy Homes has generated considerable discussion. We’re examining the factors that contributed to this transaction and its potential implications for the broader real estate technology landscape.

Ramp Launches New Product

Ramp has unveiled a new product designed to streamline financial operations for businesses. This launch expands the company’s suite of tools and aims to address evolving customer needs.

Notable Fundraising Rounds

Several fintech companies secured substantial funding this week. These investments signal continued confidence in the sector’s growth potential.

• Details on each fundraising round will be provided, including the companies involved and the amounts raised.
• We will also analyze the investors participating in these deals and their strategic rationale.

Additional Fintech News

Beyond the major headlines, a number of other noteworthy developments occurred in the fintech space. These include regulatory updates, partnerships, and product enhancements.

Stay informed about the latest trends and innovations by subscribing to TechCrunch’s fintech newsletter. Receive a comprehensive summary of the week’s most crucial stories every Tuesday at 8:00 a.m. PT by signing up here.

A Billion-Dollar Sale, A Founder's Disappointment

Divvy Homes, a fintech company specializing in real estate, recently announced its acquisition by Brookfield Properties for approximately $1 billion. This figure represents the “total consideration” for the sale. The company had previously reached a valuation exceeding $2 billion in 2021.

Despite appearing reasonably successful, particularly considering the recent closures of other proptech firms like EasyKnock, a closer examination reveals a less favorable outcome for many investors. A significant portion of the $1 billion sale price will be allocated to debt repayment.

Divvy had accumulated substantial debt, including a $735 million financing round in October 2021. This debt, along with transaction expenses and liquidation preferences for preferred shareholders, will consume the majority of the proceeds.

In a letter to stakeholders, as reported by TechCrunch, CEO and co-founder Adena Hefets disclosed that common shareholders and holders of Series FF preferred stock will receive no financial return from the sale. This represents a significant loss for these investors.

Factors Contributing to the Outcome

Rising interest rates in 2022 undoubtedly impacted Divvy’s performance. However, the company also faced other challenges that contributed to this result.

Numerous complaints surfaced regarding property maintenance and alleged eviction practices, alongside accusations of charging rents above prevailing market rates. These issues likely played a role in the company’s valuation.

Whether the sale constituted a “fire sale” remains a matter of perspective. However, Hefets herself acknowledged a lack of satisfaction with the financial results, stating she was “not proud of the financial outcome.”

The situation highlights the complexities of venture-backed exits and the potential for unfavorable outcomes even in seemingly successful transactions. Divvy Homes’ story serves as a cautionary tale within the proptech industry.

Financial Updates and Venture Capital Activity

Despite recent instability within the sector, certain proptech companies continue to secure funding. Foyer, a platform established by a former employee of Better.com, has announced a $6.2 million seed round.

This funding, spearheaded by Alpaca VC and Hometeam Ventures, supports Foyer’s mission to assist consumers in accumulating funds for down payments, functioning as a dedicated savings plan for prospective homeowners.

Fintech Developments

Jar, an Indian fintech company, has achieved cash-flow positivity, as confirmed by a company executive on January 22nd. The startup, backed by Tiger Global, provides savings and investment solutions to consumers.

Notably, this milestone was reached while the company experienced over tenfold growth throughout the preceding year, according to an investor report reviewed by Manish Singh of TechCrunch.

Ramp unveiled a new treasury product on January 22nd, designed to enhance returns on operating capital for its clientele. CEO and co-founder Eric Glyman confirmed that this expansion represents a move into territory traditionally occupied by digital banks.

Acquisitions and Valuations

Rollfi, having transitioned its focus from cryptocurrency to payroll services, is set to be acquired by Priority Tech Ventures. Priority Tech Ventures is a division of Priority Technology Holdings, a publicly listed provider of payments and banking technology.

The financial terms of this acquisition remain undisclosed.

Vertice, a London-based startup specializing in an AI-driven SaaS spend management platform, successfully raised $50 million. This funding round resulted in a reported company valuation of $500 million, as reported by Ingrid Owen.

Strategic Investments

Visa has become a new investor in African fintech company Moniepoint. Sources familiar with the transaction revealed that Visa contributed over $10 million to Moniepoint’s recent investment round.

This investment follows Moniepoint’s previously announced $110 million funding secured last October, as reported by Tage Kene-Okafor.

Method, an Austin-based platform facilitating debt and debt repayment functionalities within fintech applications – including those utilized by SoFi – has secured $41.5 million in Series B funding.

Emergence Capital led this funding round.

Recent Developments in Tech and Startups

Stripe, a leading fintech company, is undergoing restructuring, resulting in the elimination of 300 positions. Despite these layoffs, the company maintains its intention to expand its workforce in 2025.

Google has been penalized by Indonesia’s KPPU, the nation’s antitrust body. The fine, amounting to 202.5 billion Rupiahs (approximately $12.6 million), stems from an antitrust breach concerning payment processing within the Google Play Store, as reported on January 22nd.

Connections Between AI and Healthcare Startups

A noteworthy relationship exists between Mistral, a French artificial intelligence startup valued at $6 billion, and Alan, a health insurance company achieving unicorn status. Further details regarding this connection are available through reporting by Romain Dillet.

The number of startup closures in 2024 has surpassed that of the previous year. This trend is largely attributable to the substantial funding influx experienced by companies in 2020 and 2021.

Further startup failures are anticipated, potentially making 2025 another challenging year for the startup ecosystem. A detailed analysis, incorporating data from Carta and AngelList, provides deeper insight into this trend.

Recent Developments in Fintech

Deel, a prominent payroll platform, has refuted allegations of facilitating money laundering. The company attributes the lawsuit to actions initiated by a rival organization.

HSBC has decided to discontinue its payments application, Zing, just one year following its initial release.

Andreessen Horowitz is consolidating its operations, closing its UK office to refocus its efforts on the US cryptocurrency market.

Clutch has successfully raised $65 million in a Series B funding round. This investment will be used to integrate credit unions with modern fintech solutions.

Stay updated with the latest fintech news by following @bayareawriter on X for timely updates and insights.