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Rent-to-own innovator Divvy raises $30 million to fund growth

Funding round led by Andreessen Horowitz

Divvy Homes, a real estate startup aiming to revolutionize rent-to-own and fractional ownership, just raised $30 million to help the company continue growing.

Divvy officially launched earlier this year with $7 million in funding. But now, the company has $30 million more at its disposal.

The company announced Tuesday morning that it completed a $30 million Series A equity and debt round, which was led by Andreessen Horowitz (a16z) with participation from Caffeinated Capital, Scifi Ventures, and DFJ.

Caffeinated Capital and DFJ previously invested in the company.

Divvy’s business model is different than traditional rent-to-own operators, some of which have been accused of predatory practices by purchasing run-down properties and convincing tenants to rent the properties by offering them the chance to buy the house in the future despite not making any repairs or improvements.

Divvy, on the other hand, offers people the chance to live in the house they want even if they can’t afford to buy it themselves.

With Divvy, the buyer picks out any home for sale and Divvy will buy it. The buyer typically puts 2% down on the home, then pays a monthly amount to Divvy that includes both rental and equity payments.

If all goes according to plan, the equity portion builds credit in the home, with the goal of building up an equity credit of 10% of the home over three years. During that time, they can also pay down debts and demonstrate enough steady income to be mortgage-ready when that three-year period ends.

At that point, Divvy provides the resident with the option to buy out the reminder of the home with a mortgage, using the credit as a down payment.

Divvy will also offer residents the chance to buy the home at any point during those three years should they find themselves ready to do so earlier than anticipated.

The company says that its model is finding success in its current markets of Atlanta, Cleveland, and its newest market, Memphis. According to the company, it is receiving 2,000 applications each month and buying one home per day in its current markets.

And now, the company has new funding to grow its business. As part of the funding, a16z’s Alex Rampell, who leads the firm’s fintech investments, will be joining Divvy’s board.

“We are very excited to partner with Divvy by leading their Series A,” Rampell said. “In the future, you will buy your house from, or sell your house to, a company due to the laws of comparative advantage. Divvy is powerful for several reasons: it blurs the lines between renting and owning, prevents renters from using up all their income on rent, and provides better alignment between both parties.”

Divvy CEO Brian Ma said the company is “thrilled” to bring a16z on board as an investor. “We envision a world where everyone has a stake in the prosperity of their neighborhood and are excited to make Divvy the preferred partner for renters looking to purchase their first home,” Ma added.

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The latest tumult in real estate feels like our world has been turned upside down yet again. But underneath all the frenzy, I see a genuine opportunity for us to turn this into a positive and come back even stronger than before. I often think of the term “Anti-fragile” from the book of the same name by Nassim Taleb. The principle is that people and organizations can build their success around being able to come back even stronger after a wallop, instead of just withstanding the impact. This is real estate’s moment to become even more anti-fragile.

3d rendering of a row of luxury townhouses along a street

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