The next step for a successful startup after a Series C funding round is often to go public — and these days, the route is often through a merger with a special purpose acquisition company (SPAC).
For Divvy Homes, the rent-to-own proptech startup that just six months ago announced a $110 million Series C, it turns out that the next step after a Series C is … a $200 million Series D that values the company at $2 billion.
Divvy Homes’ accelerating growth “caught the attention of its lead investors,” Tiger Global Management and Caffeinated Capital, who “preempted the Series D” the company announced Friday.
The latest funding round, which also includes existing investors Andreessen Horowitz, GGV Capital, GIC, and Moore Specialty Credit, brings the total raised by Divvy Homes to date to more than $700 million.
Divvy Homes plans to use the money to “to further market expansion, launch new partnership channels, and efficiently deploy … new capital against ROI positive acquisition channels.”
San Francisco-based Divvy Homes buys homes on behalf of clients, who contribute 1 to 2 percent of the home’s value toward their down payment savings while they rent. Up to 25 percent of their monthly payments goes toward saving for a down payment, putting them on target to make a 10 percent down payment after three years and buy the home using a traditional mortgage. They’re free to change their mind, and cash out their savings if they decide not to buy.
“We’re the first real estate platform that helps you save for a down payment while you live in your dream home,” co-founder and CEO Adena Hefets said in a statement. “We are a tech-driven real estate platform, not a rental business. We are a homeownership program, not a landlord.”
Speaking at Inman Connect last month, Hefets emphasized that Divvy Homes can be a tool for agents, who are paid full commission.
“The way that I think about these tools are, let’s say in your market, 20 percent of the population could get a mortgage, and everyone else was going to be renters,” Hefets said at the time. “You can now take 40 percent or 60 percent of the population and turn them into homebuyers … so that’s really the goal, is take more consumers and turn them into homebuyers.”
Since announcing a Series C funding round in February, Divvy Homes says cumulative qualified applicants and monthly homes closed have tripled.
Over the past year, the number of real estate agents working with Divvy Homes has also tripled, to 25,000, the company said.
Divvy Homes is currently active in 16 markets, including Atlanta, Cincinnati, Cleveland, Dallas, Denver, Houston, Memphis, Minneapolis, Phoenix, San Antonio and St. Louis, Missouri. The company is expanding its footprints in Georgia, Texas and Florida, where it’s active in Ft. Lauderdale, Jacksonville, Miami, Orlando, and Tampa.
In an interview, Hefets said the latest funding round will allow the company to invest in its agent success team, and hire more employees to “onboard every agent that wants to sign up.”
Hefets said that in addition to real estate agents, Divvy Homes will seek to grow its business through new partner channels like LendingTree, and by doing more content and offline marketing. The company is also exploring partnerships with homebuilders, who often have one or two homes in a particular community that haven’t sold, she said.
Asked about the advantages of raising funds through another private round rather than going public, Hefets said the Series D valuation was attractive, and raising money privately gives the company more leeway to think long-term.
“We had considered all options,” Hefets said. “From my perspective, a SPAC makes some sense to companies that want access to liquidity or capital but can’t access it in the private market.”
But going public, she said, “puts a strain on the organization. You’re operating quarter to quarter, it’s a diffferent mindset. We might think about it in the future, but right now, as long as we can tap the private market, we don’t see [a reason to] go public yet.”
Editor’s note: This story has been updated with additional perspective from Divvy Homes co-founder and CEO Adena Hefets.