Diminished investor interest knocked a homebuying startup down a peg, scrambling plans to go public and setting off a massive round of layoffs.
Knock, a proptech startup that helps people buy new homes before selling their old ones, is laying off about half of its staff, Bloomberg reported. The company has also canceled plans to go public, raising more funds via the private route instead.
Chief executive Sean Black in a blog post detailed how investors’ turn away from blank-check companies deflated the company’s hopes of a public offering. Black also cited the onset of the pandemic and Zillow’s high-profile exit from the iBuying business as factors that cut the company’s public ambitions.
“The business is doing great, but we built to be a public company, and there’s no IPO market right now,” Black said, per Bloomberg. “It does feel like money has gotten very scarce and very expensive.”
The company on Tuesday announced a private fundraising round including $70 million in equity and $150 million in new debt. Foundry Group led the round, which included First American Financial, RRE Ventures, the National Association of Realtors, in addition to filmmaker M. Night Shyamalan and The Agency cofounder Mauricio Umansky.
Black told Bloomberg Knock hopes to be profitable by the end of the year.
The forecast pales in comparison to the $400 million to $500 million Knock hoped in March 2021 to raise in an IPO. At the time, Knock was aiming for a valuation of $2 billion; Black hasn’t disclosed the company’s valuation after the latest fundraising round, but cited money as a reason for the layoffs.
“While substantial, the capital we raised is much less than what we set out to raise in our IPO, requiring us to rightsize the business, including the difficult decision to part ways with a number of our beloved Knockstars,” Black said in the release detailing the layoffs of about 46 percent of the company’s 250-person staff.
As of last March, Knock had raised $600 million in debt and equity. The company launched as a somewhat traditional iBuyer in 2015, marketing homes directly to consumers. It has since focused on its Home Swap program, which allows consumers to buy homes before selling their own by pre-funding mortgages. Knock also offers interest-free bridge loans to let sellers make repairs.
According to Knock, the company is operating in 75 markets after expanding around Seattle earlier this year.
[Bloomberg] — Holden Walter-Warner