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Real estate tech companies continue to get hammered by high mortgage rates



Welcome back to The Interchange, where we take a look at the hottest fintech news of the previous week. This week, we take a look at one startup layoff, another offering an employee ownership buyout option, and much more. If you want to receive The Interchange directly in your inbox every Sunday, head here to sign up!

From a $2B+ valuation to round after round of layoffs

Last week, I reported on Divvy Homesthird round of layoffs in a year’s time. It was the latest casualty in a beaten down real estate tech sector.

I first wrote about rent-to-own startup Divvy Homes in September 2019 when it announced a $43 million Series B round to help in its mission to help more Americans “move from renters to [home]owners.” I then covered the company’s $110 million Series C in February of 2021.

Of course, at that time, it was a very different housing market. Interest rates were still relatively low and while markets were tight, people were still buying homes. Like most companies, Divvy was initially unsure as to how the COVID-19 pandemic would impact its business. But as 2020 went on — and the whole world spent more time at home than ever — Divvy said it only saw increased demand. So much so that the startup managed to raise another $200 million, just six months later, at an estimated $2.3 billion valuation.

Fast-forward to 2022. Mortgage rates had doubled and fewer people were putting their homes on the market or looking to buy a home. For a company like Divvy, whose business model involves purchasing homes and then renting them to people aiming to build equity, it was not a positive development.

Rising interest rates meant that the company likely had to charge more in rent to cover the mortgages it had taken out. So it’s no surprise that in 2022, both Fast Company and the New York Times reported that Divvy was supposedly charging higher rents than other landlords in some markets. It’s also not shocking that the startup laid off about 40 people in September 2022.

But that was just the beginning. In February 2023, the company let go of more workers. And last week, I reported on it laying off 94 employees, or about half its staff. Again, not a surprise considering that mortgage interest rates recently reached their highest levels in more than two decades.

The company declined to comment when I reached out, with my email to executives and the media relations team going unanswered.

A WARN letter viewed by TechCrunch stated that the job cuts affected people working in a wide range of roles, including the vice presidents of sales, compliance, people and comms/PR, as well as a senior recruiter, a number of software engineers and account executives.

The real estate tech, or proptech sector, has taken a big hit as mortgage interest rates have surged. Layoffs have abounded at both publicly traded companies such as Opendoor, Compass and Redfin and startups such as (which recently went public itself) and Homeward. Other startups didn’t survive at all. Reali announced in August 2022 it had begun a shutdown and would be laying off most of its workforce by the next month.

Real estate is a fascinating space since we’re all affected by it in one way or another. (Did you know I was a real estate reporter in a former life?!) While it’s not good to see startups laying off or shutting down, it’s unfortunately part of the cycles the industry regularly goes through. There are always ups and downs. Sometimes it’s a seller’s market. Sometimes it’s a buyer’s market. Sometimes it’s cheaper to rent. Sometimes it’s cheaper to own. Only one thing is certain: There’s never a dull day when covering this space. — Mary Ann

A house of cards collapsing on dark background

(opens in a new wiA new buyout option for employees

There are a number of reasons why a small business might need to transition to a new owner. And while startups, like Teamshares, have a lock on acquiring companies that don’t have succession plans, that might not always be what a company needs.

Last week I wrote about Common Trust, a startup offering an employee ownership buyout option. The company recently raised $2.6 million in seed funding in a round led by Crossbeam Venture Partners.

Zoe Schlag and Derek Razo founded the company in 2022 with the idea that employees often want to stay at a company with a great corporate culture and history of helping customers.

At Common Trust’s core is a unique legal vehicle called a perpetual purpose trust that enables small businesses to exit while also remaining independent.

“Employee ownership is the most scalable approach to serve this market, preserving generational businesses and quality jobs in cities and towns across America, and can be achieved at a fraction of the cost that brokers are charging, typically 10% of the transaction,” Schlag said in an email interview. Read more. — Christine

Weekly news

As reported by Zack Whittaker: “Square said there was ‘no evidence’ a cyberattack caused an outage that left customers and small businesses unable to use the payment giant’s technology on Thursday through early Friday. The payments technology giant said in a postmortem of the daylong outage that the outage was caused by a DNS issue. DNS, or domain name system, is the global protocol that converts human-readable web addresses into IP addresses, which allow computers to find and load websites from all over the world.” More here.

In a guest post, Navan’s Michael Sindicich writes that “fintech faces a reckoning. Over the past two years, central banks have hiked interest rates from their COVID-era lows to the highest levels for a generation. And now the business models that won consumers’ affection look increasingly tenuous. It’s only a matter of time until the house of cards collapses.” More here.

Citizens Bank is launching a new startup-focused private bank. Mary Ann talked at length with Sam Heshmati, who joined the institution as its head of emerging VC and innovation banking in July. Heshmati had worked at First Republic Bank for more than a decade and helped launch its startup practice. He details what it was like to witness First Republic’s collapse from the inside, as well as how Citizens aims to become the “‘go to bank’ for the innovation sector.” More here.

Other items we are reading:

How Charlie Javice got JPMorgan to pay $175M for … what exactly?

Deel changes terms of service, cuts off high-risk trading sites

Britain’s $4.5B digital bank Monzo debuts investments feature

Fountain offers integration with payments platform Branch

Everyware taps Visa Direct and launches Instant Payouts

Episode Six Debuts BNPL plan as companies hunt working capital

Chase Payment Solutions partners with Gusto to add payroll

Fundraising and M&A

Seen on TechCrunch

Perfios raises $229M for its real-time credit underwriting solutions

Swan secures $40M to bring embedded banking to Europe

Parallax removes the friction from cross-border payments

Alza emerges from stealth to offer affordable and inclusive financial tools to immigrants 

Seen elsewhere

Home insurtech Kin reaches $1B valuation

Treasury4 raises $20M in new capital

CLARA Analytics raises $24M in Series C funding

Exclusive: a16z leads $17M deal in bond trading startup

Software development startup Caliza raises $5.3M and launches in Brazil

N5 raises funding

Spring Activator acquires Future Capital to expand impact investing

Discover the Fintech Stage at Disrupt 2023

Check out the Fintech Stage at TechCrunch Disrupt 2023, taking place in San Francisco on September 19–21, where we cover web3, banking, and more. Last-minute passes are still available. Save 15% with code INTERCHANGE. Register now!

Image Credits: Bryce Durbin 

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Webb Telescope Just Found The Holy Grail In A Famous Supernova




At long last scientists believe they have the answer to what happened to a star that died in a famous supernova explosion not far from home.

The James Webb Space Telescope detected strong evidence supporting the existence of a neutron star, one of the densest objects in space, in its infancy. While some supernovas result in a new black hole, others create neutron stars when the core of a massive star collapses.

Though astronomers have known about neutron stars for decades, no one had actually seen one of these objects being formed before. The hunt for a neutron star within this close supernova remnant has been regarded as a holy grail quest.

“With this observatory, we have now found direct evidence for emission triggered by the newborn compact object, most likely a neutron star,” said Claes Fransson of Stockholm University, the lead author of the study, in a statement released by NASA.

Scientists first saw this stellar explosion — dubbed SN 1987A — with the naked eye nearly 40 years ago in the Large Magellanic Cloud, a small satellite galaxy of the Milky Way about 160,000 light-years away. Since then, they’ve investigated it at radio, gamma-ray, and X-ray wavelengths — searching for clues among the ashes for what came of the deceased star.

But supernovas, by their very nature, churn out a lot of dust, clouding the view. Stars on the verge of dying and supernovas are element factories: They make carbon, for instance, the same chemical on which humans and much of life on Earth are based. Then they spread elements like calcium found in bones and iron in blood across interstellar space.

This dispersal seeds new generations of stars and planets, but scientists admit they have much to learn about the early stages of the process.

The James Webb Space Telescope has observed the best evidence yet for emissions from a neutron star in supernova remnant SN 1987A.
Credit: NASA / ESA / CSA / STScI / Claes Fransson / Mikako Matsuura / M. Barlow / Patrick Kavanagh / Josefin Larsson

Webb, the leading infrared telescope, was finally able to “see” what other telescopes couldn’t in the aftermath. The new study, published this week in the journal Science, found evidence of heavily ionized argon (meaning argon atoms that had become electrically charged) in the center of the exploded material. Researchers think the most likely explanation for the changed argon is ionizing radiation from a neutron star.

“To create these ions that we observed in the ejecta, it was clear that there had to be a source of high-energy radiation in the center of the SN 1987A remnant,” Fransson said in a statement. “Only a few scenarios are likely, and all of these involve a newly born neutron star.”

Solving this mystery may help scientists better understand how stellar corpses evolve over time.

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NASA Spacecraft Spots Dramatic View Of New Impact Crater On Mars




There’s a fresh crater on Mars, a reminder of our still-dynamic solar system.

NASA‘s Mars Reconnaissance Orbiter, a spacecraft orbiting Mars since 2006, uses an extremely powerful camera to observe the Martian surface. The team running the aptly named High Resolution Imaging Experiment, or HIRISE camera, recently released a detailed image of this impact crater.

“A Small, Very Recent Impact Crater,” they succinctly posted online. “That’s it. That’s the whole caption.”

It’s not that small. Maybe small compared to the Martian behemoths. The image above is 1 kilometer (0.6 miles) across, while the zoomed-out view below shows a Martian scene 5 km (3.1 miles) wide.

It’s unclear when such a recent object, likely an asteroid, crashed into Mars, leaving a sizable dent in the equatorial region of the Red Planet. But you can see markings from ejecta strewn around the impact basin.

The “very recent” impact crater spotted in the equatorial region of Mars.
Credit: NASA / JPL-Caltech / UArizona

Mars is absolutely covered in craters. NASA estimates there are over a quarter-million impact craters about the size of Arizona’s famous Barringer Crater, which is some 4,000 feet across. And there are over 43,000 Martian craters larger than three miles wide.

The Red Planet is much closer to our solar system’s asteroid belt, a region teeming with millions of asteroids. When they do collide with Mars, the Martian atmosphere is just 1 percent the volume of Earth’s, meaning these space rocks are less likely to heat up and disintegrate. What’s more, Mars isn’t nearly geologically dead — marsquakes frequently occur there — but it’s not nearly as active as Earth, a water-blanketed planet teeming with erupting volcanoes. On Mars today, there’s no geologic activity or volcanism to wash away, or cover up, new craters.

(Meanwhile, Earth has just around 120 known impact craters. That’s because over hundreds of millions of years, different parts of Earth’s surface have both been covered in lava or recycled as the giant plates that compose Earth’s crust, tectonic plates, continually move rock below and back up to the surface.)

As for us Earthlings, significant strikes from asteroids are rare:

– Every single day, about 100 tons of dust and sand-sized particles fall through Earth’s atmosphere and promptly burn up.

– Every year, on average, an “automobile-sized asteroid” plummets through our sky and explodes, explains NASA.

– Impacts by objects around 460 feet in diameter occur every 10,000 to 20,000 years.

– And a “dinosaur-killing” impact from a rock perhaps a half-mile across or larger happens on 100-million-year timescales.

So there’s no reason to live in fear — but it’s reasonable to have a healthy level of respect for the big space rocks out there. After all, with the asteroid deflection technology being created and tested today, we might be able to nudge a menacing asteroid off its course, should one ever barrel toward our humble blue planet.

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Miranda Bogen is creating solutions to help govern AI




To give AI-focused women academics and others their well-deserved — and overdue — time in the spotlight, TechCrunch is launching a series of interviews focusing on remarkable women who’ve contributed to the AI revolution. We’ll publish several pieces throughout the year as the AI boom continues, highlighting key work that often goes unrecognized. Read more profiles here.

Miranda Bogen is the founding director of the Center of Democracy and Technology’s AI Governance Lab, where she works to help create solutions that can effectively regulate and govern AI systems. She helped guide responsible AI strategies at Meta and previously worked as a senior policy analyst at the organization Uptown, which seeks to use tech to advance equity and justice.

Briefly, how did you get your start in AI? What attracted you to the field?

I was drawn to work on machine learning and AI by seeing the way these technologies were colliding with fundamental conversations about society — values, rights, and which communities get left behind. My early work exploring the intersection of AI and civil rights reinforced for me that AI systems are far more than technical artifacts; they are systems that both shape and are shaped by their interaction with people, bureaucracies, and policies. I’ve always been adept at translating between technical and non-technical contexts, and I was energized by the opportunity to help break through the appearance of technical complexity to help communities with different kinds of expertise shape the way AI is built from the ground up.

What work are you most proud of (in the AI field)?

When I first started working in this space, many folks still needed to be convinced AI systems could result in discriminatory impact for marginalized populations, let alone that anything needed to be done about those harms. While there is still too wide a gap between the status quo and a future where biases and other harms are tackled systematically, I’m gratified that the research my collaborators and I conducted on discrimination in personalized online advertising and my work within the industry on algorithmic fairness helped lead to meaningful changes to Meta’s ad delivery system and progress toward reducing disparities in access to important economic opportunities.

How do you navigate the challenges of the male-dominated tech industry and, by extension, the male-dominated AI industry?

I’ve been lucky to work with phenomenal colleagues and teams who have been generous with both opportunities and sincere support, and we tried to bring that energy into any room we found ourselves in. In my most recent career transition, I was delighted that nearly all of my options involved working on teams or within organizations led by phenomenal women, and I hope the field continues to lift up the voices of those who haven’t traditionally been centered in technology-oriented conversations.

What advice would you give to women seeking to enter the AI field?

The same advice I give to anyone who asks: find supportive managers, advisors, and teams who energize and inspire you, who value your opinion and perspective, and who put themselves on the line to stand up for you and your work.

What are some of the most pressing issues facing AI as it evolves?

The impacts and harms AI systems are already having on people are well-known at this point, and one of the biggest pressing challenges is moving beyond describing the problem to developing robust approaches for systematically addressing those harms and incentivizing their adoption. We launched the AI Governance Lab at CDT to drive progress in both directions.

What are some issues AI users should be aware of?

For the most part, AI systems are still missing seat belts, airbags, and traffic signs, so proceed with caution before using them for consequential tasks.

What is the best way to responsibly build AI?

The best way to responsibly build AI is with humility. Consider how the success of the AI system you are working on has been defined, who that definition serves, and what context may be missing. Think about for whom the system might fail and what will happen if it does. And build systems not just with the people who will use them but with the communities who will be subject to them.

How can investors better push for responsible AI?

Investors need to create room for technology builders to move more deliberately before rushing half-baked technologies to market. Intense competitive pressure to release the newest, biggest, and shiniest new AI models is leading to concerning underinvestment in responsible practices. While uninhibited innovation sings a tempting siren song, it is a mirage that will leave everyone worse off.

AI is not magic; it’s just a mirror that is being held up to society. If we want it to reflect something different, we’ve got work to do.

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