Rent-to-own real estate tech company Divvy Homes raised $110 million in a Series C equity funding round, the company announced on Tuesday.
The round was led by Tiger Global Management with participation from GGV Capital, Moore Specialty Credit, JAWS Ventures and other of the company’s existing investors. Including the new funding round, Divvy has raised a total of over $500 million in debt and equity capital.
“At the start of the pandemic, we made a commitment to help and support as many future homeowners as possible,” Adena Hefets, co-founder and CEO of Divvy Homes, said in a press statement. “During COVID-19, new mortgages became difficult to secure as banks tightened underwriting requirements for approvals. As a result, families were locked out of homeownership opportunities during a global pandemic — a time when they needed safety and shelter most. Divvy stepped up in place of traditional financing.”
Divvy Homes, which was founded in 2017, purchases homes on behalf of its customers, then rents the home back to them while the customer continues to build equity on the property. Initially the renter contributes 1 to 2 percent of the home value to the purchase, then about 25 percent of each monthly payment that follows goes toward saving up for a down payment.
The agreement between renters and Divvy is organized so that renters can save up to 10 percent of the home’s value over the course of a three-year lease, but can also buy the home at any time. Or, if the renter decides against the home, they can walk away and receive cash for their savings.
With the new funding, Divvy plans to increase its market share to more than 70 million Americans in over 20 markets by the end of 2021. In 2020 Divvy expanded to a total of 16 markets and increased the number of homes it financed by five times compared to pre-pandemic figures.
The company also plans to launch additional products to create an end-to-end homebuying experience for its customers.
“Divvy has created a new category of homeownership that addresses the changing American household, providing a safe way to save and build wealth for those who cannot access a traditional mortgage,” Alex Rampell of Andreessen Horowitz said in a statement. “Teachers, nurses, and others who are the backbones of our communities are among the groups who benefit the most from the Divvy model, and it’s been inspiring to watch Divvy set so many on a path to homeownership that works for them.”