Proptech is getting salted, heavily🧂
If you created a real estate product or service in the last five years that only works for buyers, in a buyers market, the music has stopped playing.
Proptech is a catch-all term for any technology applied to the real estate market or transactions. Many proptech startups over the last few years have been directly related to the home-buying process. If these companies were slugs, then the fed rate hikes have been copious amounts of salt. (when salt is poured on slugs, they dehydrate and die almost instantly)
Divvy Homes kicked 12% of their staff a few days ago. The carnage was all over my linkedin feed since I know a few folks there. And they're not alone. Better.com, which offers home-buyers the ability to make all-cash offers in order to be more competitive, just made a fourth round of layoffs which doesn't bode well for them. Reali, which was similar to Better.com, raised $100m and closed doors a year later (last month).
The list goes on, and get's more depressing from there. Are we really surprised, though?
Any company that picks one small gear in the machine that is their industry, whether that's ecommerce, real estate, technology, etc., and attempts to only make things 1% better, or faster, or cheaper, is not building a business. They are building a feature and hoping to figure out the rest as they go.
This strategy has worked for many others in the last 20 years, but it's not happening anymore for the real estate tech (proptech) corner of the world, when, for the last seven years, so many startups had been laser-focused on capitalizing on the "up market" where home-sellers were king and financing was cheaper than dirt. That slug was salted this past summer.
So what? Why should you care?
Even if you don't own a business, you probably work for one. Or even if you don't work for one, you probably have some family members who do. I don't know about you, but I hate to see layoffs.
I'm keeping my eyes peeled for 1) opportunities for us at Level and 2) other companies that are taking similar steps to insulate their business model (and by proxy, their ability to retain employees) against swings in their respective market.
We've definitely been affected by the slowdown in home-buying, I won't lie. Our most popular products are our contract reviews, which are overwhelmingly popular with people about to buy a home. But thankfully, all of our products work equally well in a down real estate market, and we've seen an influx of people looking for a cheaper alternative to pricey attorneys for their initial contract review. I'll have more to report on this as things progress over the next six months!
That's all for today. Are layoffs 🪓 incoming or happening now in your part of the working world?
A side note: there's a google sheet going for those laid off by Divvy, in case you're hiring 😉