real estate tech

3 investors explain how finance-focused proptech startups can survive the downturn • ZebethMedia

By zebethcontrolPosted on November 2, 2022Posted in EC Fintech, EC investor survey, EC Real Estate and Proptech, economic downturn, Fintech, proptech, real estate tech, StartupsNo Comments

In the early days of the COVID-19 pandemic, interest rates for mortgages dropped to historic lows. Predictably, home buyers made hay, taking full advantage of the favorable financial environment to pick up new homes and refinancing mortgages on their existing homes. Startups operating in the financial side of the real estate tech market suddenly faced a surge in demand, and many departed on hiring sprees to keep up. But as those interest rates, housing prices and inflation began to climb back up, demand slowed dramatically. This meant that the once high-flying startups were suddenly dealing with the opposite problem — too many employees and not enough transactions to make money. Layoffs became widespread. Shutdowns were a thing again. As interest rates soared even higher, the once frothy market morphed into an environment where only the fittest could survive. We’re widening our lens, looking for more investors to participate in ZebethMedia surveys, where we poll top professionals about challenges in their industry. If you’re an investor and would like to participate in future surveys, fill out this form. To get a sense of how investors who have backed proptech startups with a financial focus are dealing with the market shift, we reached out to three active investors. The trio shared their thoughts on everything from what types of startups in the home buying and lending space have the best shot at survival to the advice they are giving startups in their portfolios. Pete Flint, general partner of NFX, noted that the chances of survival are higher for proptech startups that let consumers fractionally invest in properties and increase access for those seeking a rent-to-own approach. “The best thing founders can do during a downturn is move quickly and efficiently, and evolve their offering to match the new needs of the market. This will help them capture more market share, which will give them the highest chance of survival,” he said. Nima Wedlake, principal at Thomvest Ventures, agreed, noting that agility is a critical trait. “Startups that survive this period will adapt their product offerings to meet the needs of today’s homeowners and buyers,” he said. In such a climate, companies that help others navigate tough times seem to be in special demand. “Companies that sell software that enables cost-cutting or additional lead-generation opportunities are seeing accelerating adoption as incumbent mortgage companies realize they need an edge to drive demand,” Zach Aarons, co-founder and general partner of MetaProp, pointed out. “If a startup can prove its users see significant savings, then they shouldn’t have a hard time being successful in this market,” he said. We spoke with: Editor’s note: For a more complete picture, we’re examining the proptech sector from three different angles. This survey covers proptech startups with a financial focus, and we’ll soon publish a survey that looks at upcoming tech in the space, and another that examines the environmental impact of proptech and what startups are doing to minimize their footprint. Pete Flint, general partner, NFX Startups doing anything related to home buying or lending have struggled this year. Which types of startups operating in the home buying/lending space do you think have the highest chances of survival? Resilient proptech companies have to be able to navigate the cyclicality of the industry. It is embedded in the category, and with the long housing and tech boom, many founders have underestimated this. In my view, it is less about the “type” of startup that is more likely to survive now and more about what the startups do to respond to this moment. The best thing founders can do during a downturn is move quickly and efficiently, and evolve their offering to match the new needs of the market. This will help them capture more market share, which will give them the highest chance of survival. The verticals that we think will be more resilient during this economy are:

Opendoor lays off about 550 employees, or 18% of its workforce • ZebethMedia

By zebethcontrolPosted on November 2, 2022Posted in Eric Wu, Fintech, Layoffs, OpenDoor, proptech, real estate techNo Comments

Opendoor is letting go of about 550 people, or 18% of the company, across all functions, its co-founder and CEO Eric Wu announced in a blog post today. The real estate technology company is one of many real estate tech companies that have had to lay off workers in 2022. Online mortgage lender Better.com has had multiple rounds of layoffs and in June, Redfin and Compass shed a combined 900+ workers. Skyrocketing mortgage interest rates and inflation are largely to blame for the decreased demand that has led to slowdowns in business at such companies. For his part, Opendoor’s Wu said his company was navigating “one of the most challenging real estate markets in 40 years.” In his blog post, the executive said that his company over the past two quarters had worked to reduce its operating expenses. He wrote: “Prior to today, we scaled back our capacity by over 830 positions – primarily by reducing third party resourcing – and we eliminated millions of fixed expenses. We did not make the decision to downsize the team today lightly but did so to ensure we can accomplish our mission for years to come.” Impacted employees will receive ten weeks of severance pay, with an additional two weeks of pay for every full year beyond two years of tenure. All current healthcare benefits will remain active for the rest of the month, then Opendoor will pay for three months of health insurance. The company also plans to offer “job transition support” and launch an opt-in talent directory to help laid off team members “connect with new opportunities.” Opendoor went public in late December 2020 after completing its planned merger with the SPAC Social Capital Hedosophia Holdings II, headed by investor Chamath Palihapitiya. The eight-year-old company first offered its stock to the public at $31.47 per share. At the time of writing today, shares were trading at $2.48, only slightly higher than the company’s 52-week low of $2.26. This means that the company is valued at just $1.56 billion, down from a valuation of $8 billion in 2021. When it comes to venture capital, Opendoor last raised $300 million at a $3.5 billion pre-money valuation in March of 2019. Over time, it has raised about $1.3 billion in equity funding and nearly $3 billion in debt financing to finance its home purchases. Investors in the company include General Atlantic, the SoftBank Vision Fund, NEA, Norwest Venture Partners, GV, GGV Capital, Access Technology Ventures, SV Angel and Fifth Wall Ventures, along with others. Founders include Eric Wu and Founders Fund general partner Keith Rabois.

Clear Capital lays off 27% of its global staff • ZebethMedia

By zebethcontrolPosted on October 14, 2022Posted in Clear Capital, Commerce, Layoffs, real estate techNo Comments

Clear Capital, a real estate valuation technology company and firm, is laying off 27% of its staff months after freezing mass hiring, ZebethMedia has learned from sources. A spokesperson for Clear Capital confirmed the layoffs to ZebethMedia but did not share the specific number of employees impacted. Last November, the company announced they had 1,400 total global employees, so using that figure the layoff could have impacted 378 employees. The reduction primarily impacted its operational team, according to sources. “Clear Capital is restructuring all company divisions to reduce expenses and support our future business strategy amidst today’s housing market reality,” said Duane Andrews, CEO of Clear Capital in a written statement to ZebethMedia. “This will allow us to refocus the business on key areas and ensure we are on track for sustainable growth. The CEO also cited ”the impact of a rising interest rate environment in the mortgage industry has resulted in a significant decrease in volume from our customers,” as a reason for the layoffs. The company did not explain what type of severance, if any, was offered to employees. In an internal memo sent to employees obtained by ZebethMedia, Andrews explained Clear Capital executives had anticipated a decrease in work volume over the summer but did not expect to make cuts come fall. “Keeping folks engaged and contributing was necessary; our forecasts showed that the Fall would bring increased volume,” read Andrews’ memo. “As we approached Fall, the markets stated indicating otherwise, and we now know volume will not return for a significant period of time.” Andrews added the decision to cut staff and locations was “a last resort” and “there are no guarantees” that further cuts won’t be made. Sources explained employees were required to attend an “abrupt” Google Meet call at 9 a.m. PST on Wednesday. Once in, they were split into two groups: those that would remain and those laid off. Employees were told back in August that there would be no layoffs, sources say. Sources declined to comment on the record due to fear of retaliation, and because they said Clear Capital advised employees not to speak to the press. According to a meeting call recording obtained by ZebethMedia, Clear Capital’s Vice President of Customer Success Heather Shick and Executive Vice President of Customer Experience Luke Fredrick addressed the layoffs to employees and asked for those staying to feed into their “grit”. “Everything that we planned on with this was so that we didn’t need to do it again,” Shick said, “Our goal is to not have this meeting a second time, but there is no guarantee. Your workloads are going to change. You’re going to be busier. We are all going to be busier, and it’s going to be tough.” Shick further explained in the call that inflation rates in the real estate investing market led to the company’s decision. Inflation rates have surged drastically after the COVID-19 pandemic and have impacted the real estate space. As the once-hot market begins to freeze the rate hike has brought into question if there will be a potential recession. The Reno, Nevada-based company claims to be the “leader in property valuation management and data solutions”, and works as the middleman for banks, investors and homeowners. Last year, the company bought CubiCasa, a Finland-based floor planning app for iOS and Android for an undisclosed amount. Despite the company’s signs of growth, it was facing declines in customer volume to which Clear Capital cites macroeconomic conditions. Employees laid off explained that the decision was unexpected and caught them by surprise. One source told ZebethMedia they “feel in shambles”. During the meeting, Clear Capital announced it would be closing its Truckee, Calif. office and said there will be no operational staff in its Roseville, Calif. location. Those still employed are expected to return back to in-person work on Oct. 24. Current and former Clear Capital employees can contact Andrew Mendez by e-mail at andrew.mendez@techcrunch.com or on Signal, a secure encrypted messaging app, at 669-832-6800.