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Despite all the headaches that come with it, homeownership is still the American dream for many.
Divvy Homes – a startup that is out to help more people realize that dream by buying a house and renting it back to them while they build equity – has just closed on $110 million in Series C funding. Tiger Global Management led the round, which also saw participation from a slew of other investors including GGV Capital, Moore Specialty Credit, JAWS Ventures, and existing backers such as a16z. The latest financing brings Divvy’s total debt and equity raised since its 2017 inception to over $500 million with about one-third of that raised in equity and two-thirds in debt.
The startup last raised $43 million in Series B funding from the likes of Affirm CEO Max Levchin and homebuilder Lennar (via its venture arm), among others. In fact, Divvy – which was co-founded by Adena Hefets, Nick Clark and Alex Klarfeld. – was incubated in Levchin’s startup studio HVF.
Mortgage rates dropped to historic laws in 2020, driven by the COVID-19 pandemic. Instead of making it easier to buy a home, many banks actually tightened underwriting requirements for approvals, said Divvy CEO Hefets. So while lenders were busier than ever, much of that volume was driven by people who already owned homes refinancing with the lower rates.
Like most companies, Divvy was initially unsure as to how the pandemic would impact its business. But as the year went on – and the whole world spent more time at home than ever, the company only saw increased demand.
“We actually paused home buying for March and April and just kind of stood still waiting to see what would happen to the world,” Hefets said. “And when it felt like the world became stable again, we said, ‘Okay, let’s get back out there.’ ”
Divvy Homes CEO and co-founder Adena Hefets
Ultimately, over the course of 2020, Divvy expanded operations from 8 to 16 total markets and financed five times as many homes as it had in pre-pandemic times. It also worked with its existing customers by offering flexibility and rent relief in the way of waived late fees and flexible payment scheduling, for example.
“Mortgages were harder to get yet we were seeing this mad rush of people who wanted to move out of multifamily and downtown areas,” Hefets recalls. “So while traditional financing dried up, we saw a really good tailwind for our business.”
Divvy declined to disclose the valuation at which this round was raised but Hefets said it was “very highly oversubscribed.”
Rent to own
So how does Divvy work?
Divvy claims to be different from other real estate tech companies in that it aims to digitize “the archaic, data-heavy processes buyers encounter along the way.” It 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.”
Rather than buy homes and look for renters, the company does the opposite. Customers pick out a home and Divvy purchases it on their behalf with the renter contributing an initial 1-2 percent of the home value. They move in at closing, and pay one monthly amount. Part of that money is a “market-rate” rent and about 25 percent goes toward building up their savings in the house so they can put a down payment (estimated at 10 percent value of the home) on to purchase from Divvy later. The renters can choose to cash out their equity or purchase the home before the three years are up, if they choose. They also have the option to re-up their contract if needed, to take a bit longer to save up for a larger down payment.
Divvy started buying homes in the first half of 2018 and so far, the company is seeing nearly half of those renters buying back the homes.
“Even the most experienced players in the space, maybe have low single-digit buyback rates so it’s definitely quite a bit higher than what the rest of the industry is seeing,” Hefets told TechCrunch.
When it first started out, the prices of the homes it bought averaged around $140,000 to $150,000. Now the average home prices are more like just over $200,000, she said.
While Divvy’s mission involves wanting to make homeownership more accessible, Hefets points out that it’s a lucrative business model as well.
“The number of people who fall outside of the traditional mortgage box is growing,” she added, with more people struggling to be able to purchase a home.
Investor POV
Andreessen Horowitz General Partner Alex Rampell led the first investment in Divvy. He recognizes that from the consumer perspective, it’s difficult to be able to save for a down payment “when you’re throwing away money on rent every month.”
“A huge number of people want to become homeowners but just can’t,” he said.
Rampel also appreciates that its model is not as speculative as the typical investor approach of first buying a home and then renting it out.
“So they’re not spending the first nine months after purchasing a home looking for a tenant,” he said. “They’re not speculating on an empty house and worrying what happens if they buy a home and can’t rent it out.”
For Tiger Global Partner Scott Shleifer, what Divvy has accomplished is “phenomenal.”
“Over the next ten years we believe they could help over one hundred thousand families become financially responsible homeowners,” he said in a written statement.
Looking ahead, Divvy plans to use its fresh capital in part to expand to more markets with the lofty goal of serving more than 70 million Americans in over 20 markets by year’s end beyond cities such as Atlanta, Denver, Dallas and Tampa. The 80-person company also plans to take its offering a step further by launching ancillary product offerings to take buyers throughout the home buying journey. It already helps customers through title & escrow, inspections, negotiating and repairs. But ultimately, Divvy wants to “create a complete end-to-end experience” from providing realtors to serving as a lender, according to Hefets.
“That’s our bigger vision,” she said. “We’re not there yet.”
Following a government review, the U.K.’s financial services regulator will instructed to regulate the buy now, pay later industry made popular by companies such as Klarna, and AfterPay (known as Clearpay in the U.K.).
A further consultation with the industry is underway and then, when parliamentary time allows, new laws regulating buy now, pay later will be passed.
This will see the Financial Conduct Authority (FCA) asked to bring in stricter controls for interest-free buy now, pay later agreements, including firms being asked to undertake more comprehensive affordability checks before lending, and ensuring customers are treated fairly, “particularly those who are vulnerable or struggling with repayments”. Until now, because the industry has been unregulated since it falls outside of other interest-bearing credit products, such as credit cards, consumers have been left with little formal recourse when things go wrong.
“Many consumers do not view interest-free buy-now-pay-later as a form of credit, so do not apply the same level of scrutiny, and checks undertaken by providers tend to focus on the risk for the firm rather than how affordable it is for the customer,” says the U.K. Treasury.
The review, undertaken by the FCA’s Christopher Woolar, also rightfully highlights the issue of credit checks and the lack of visibility between lenders. “Although the average transaction tends to be relatively low, shoppers can take out multiple agreements with different providers – and the Review finds it would be relatively easy to accrue around £1,000 of debt that credit reference agencies and mainstream lenders cannot see,” notes the Treasury.
The review also estimates that buy now, pay later in the U.K. is worth £2.7 billion ($3.7 billion), with 5 million people USING buy now, pay later since the pandemic-induced boom in online shopping, with many already in arrears from other forms of credit.
Up until now, interest-free buy now, pay later offered by retailers has fallen outside of U.K. regulation designed to protect consumers from credit-based financial products, something Alice Tapper, a financial campaigner in the U.K. who last June started the #regulateBuyNowPayLater campaign, previously told me is “a classic case of regulation not keeping up with tech giants”.
“The consumer credit act, written back in the 1970s was not drafted with algorithms and split-second lending decisions in mind,” she explained. “What this means in practice is zero consumer protection. Consumers are given no information about risk at the point of purchase or in ads. No mention of debt collection or responsible spending. This is particularly concerning for young and vulnerable consumers, who may have no prior experience of using credit products.”
Meanwhile, Klarna, for example, has always maintained it isn’t against further regulation per se. The devil, of course, will be in the detail, which is still being worked out. “I think good regulation that’s written in a meaningful way could make sense,” Klarna CEO and co-founder Sebastian Siemiatkowski told me late last year. “We’re not against it at any point, as long as it makes sense, as long as it’s equal for all players in the market.”
Source: https://techcrunch.com/2021/02/02/buy-now-pay-later-to-be-regulated-in-the-uk/
Holded, a platform billing itself as an ERP aimed at small businesses, has raised a €15M Series B funding round led by VC firm Elaia, together with Lakestar, Nauta Capital and Seedrocket.
Holded says it gives small business access to ERP-style planning across invoicing, accounting, sales, project management, inventory management and HR, in one dashboard. It’s attracted 80,000 customers to date. The money will be used to grow its technology and business teams. Its product is also used by accounting firms to digitalize their businesses and become value-added resellers. It will now open an office in Paris.
In a statement co-founder, Javi Fondevil said: “We knew the idea of centralizing all your business in one place was very powerful and the only reason why nobody did it before was that it’s extremely hard to design an intuitive self-serve ERP for Small Businesses.”
Pauline Roux, Partner at Elaia, said: “We strongly believe that the opportunity ahead to build solutions for small businesses is massive. In the case of ERPs, solutions tend to be very complex modular products and, as Small Businesses don’t have independent departments, they need an integrated and very intuitive solution. Most of the new ERPs are just doing the same as the incumbents but in the cloud. Holded developed the first ERP we have seen without modules, long implementation times or consultants needed, they’ve really changed the whole experience.”
The ERP startup space is hotting-up. In January Xentral, a German startup that develops enterprise resource planning software covering a variety of back-office functions for the average online small business, picked up a Series A of $20 million.
There’s something difficult to reconcile watching Spot walk up a flight of stairs in some industrial setting. After years of watching viral videos of Boston Dynamics robots perform aesthetically impressive feats, there’s a banality in the quadruped performing those dull, dirty and dangerous tasks that roboticist love to talk about.
But six and half months after the company opened Spot up for sale (and more than 400 sold, per BD), companies have been deploying the advanced piece of machinery in some downright dreary settings. Yesterday morning, I had the opportunity to pilot the robot around one of them, from the comfort of my own desk.
This week the Hyundai-owned robotics pioneer is introducing Scout, a browser-based interface for remotely controlling the robot. The arrival will also be joined by a self-charging “Enterprise” edition of the robot and the already announced Spot Arm. All of the new hardware is available starting today through Boston Dynamics’ site (it’s one of those “call for a quote” pricing deals), though Scout will also be compatible with any version of the robot.
Image Credits: Boston Dynamics
That said, the company is recommending it be paired with the self-docking Enterprise version. After all, the robot runs about 90 minutes on a charge, so if you’re intending to use it to monitor a situation without people present, that’s probably the way to go.
I’ve driven Spot around a few times in person — and like those, there’s a bit of a learning curve here. Boston Dynamics estimates it will take around 15 minutes to get you fully up to speed, but after a minute or two, I was able to send the robot up and down a flight of stairs at BD HQ. There are, thankfully, a whole bunch of cameras and other sensors built into the $75,000 robot to help you avoid doing something really stupid.
Image Credits: Boston Dynamics
The system will work with Bluetooth gaming controllers, but for my demo, I was stuck with the keyboard. There’s a basic WASD control scheme that should be familiar if you’ve done any PC gaming. The arrow keys, meanwhile, can be used to switch between four cameras, giving you a view from all sides. There are a number of additional views, including a terrain mode that gives you a kind of top-down rendered view of the robot. That’s probably the best way to view all of the immediate obstacles — or better still, you can do a picture in picture to get views at once.
I found myself using “click to go” a lot, as well. It essentially works the way it sounds: You click on a point on the ground and Spot walks toward it. The feature is designed primarily for those with connection issues — imagine, say, you’ve got poor Spot deployed on some oil rig somewhere.
“[W]e have a power plant customer who had a possible equipment failure. They were able to use the robot to repeatedly inspect something that, if it failed could have been dangerous to a human inspector,” Spot’s Chief Engineer Zack Jackowski told TechCrunch. “So they logged in, checked on this pipe repeatedly and were able to avoid an expensive shut down.”
Image Credits: Boston Dynamics
There’s also a “stair mode” that positions the robot for walking up and down stairs. The feature needs to be manually toggled on and off, though the robot should be able to walk up a flight of stairs in normal mode (I did this in my demo, and didn’t appear to give anyone on staff a heart attack). For the time being, the functionality is limited to line of sight. Jackowski adds, “We have all sorts of crazy plans to extend that to building scale, but the first thing we want to get out there is line of vision.”
In addition to a new docking connector on the Robot’s bum, the Enterprise version will also sport an enhanced CPU and improved wireless connectivity. It will ship either as a bundle with the dock or solo.
Sadly, we weren’t able to take the new arm out for a spin, but Jackowski did offer some detail on that functionality, noting, “you issue the arm commands, like ‘move your hand here’ or ‘pick up this object’ or ‘turn this valve,’ and the robot’s actually smart enough to figure out, ‘hey, if I’m going to turn that valve, I need to stand over here, I need to shift my weight like this, I need to figure out how to keep the right part of my wrist limp to accommodate how that valve moves.’ ”
Source: https://techcrunch.com/2021/02/02/soon-boston-dynamics-spot-will-be-remotely-opening-doors-anywhere/
