Digital mortgage lender Tomo has laid off nearly one-third of its workforce less than three months after an equity capital injection — the latest casualties in a tech and mortgage industry purge.
A total of 44 employees were let go, Insider reported Tuesday. It is unclear if any executives were jettisoned in the downsizing, which management attributed to headwinds in the mortgage and venture capital markets.
“The recent shift in the mortgage and venture capital markets due to the rapid increase in interest rates has impacted Tomo’s business plans, and led us to make changes to our near-term strategy,” CEO Greg Schwartz told the publication.
Stamford, Connecticut-based Tomo, co-founded in 2020 by Schwartz and fellow ex-Zillow executive Carey Armstrong, raised $40 million in a Series A round in March that it said more than doubled its valuation to $640 million.
At the time of the raise, Tomo was pushing into new markets and planning to double its headcount this year. The company, which set out to cultivate an “ecommerce-like” experience for borrowers, had assumed that by focusing on purchase-mortgages and forgoing refinancings that it could bypass the trouble that had befallen competitors like Better.com, which has laid off thousands since interest rates began rising last fall, and capture market share in a frenzied housing market.
The severity of recent macroeconomic turmoil, however, has caught many off guard and forced venture capitalists to pull back, causing a dramatic cooling in the capital markets where tech companies, including proptechs, had grown accustomed to sizable funding rounds at higher and higher valuations.
VC firms are now encouraging their portfolio companies to cut costs until more favorable conditions return, which could be months away, according to RET Ventures’ Christopher Yip.
“Companies that raised a lot and hired a lot but haven’t quite figured out the unit economics, or a sustainable business model yet. Those are the first ones that are saying, ‘This is the right moment in time to try to tighten the belt,’” he said. “I think you’re seeing a lot of those tough conversations.”
Some 16,000 tech industry employees were laid off in May alone, according to the website layoffs.fyi. Within the proptech field, mortgage-related startups have been particularly hard hit. In April, the digital lender Blend Labs laid off 200 employees, or roughly 10 percent of its staff.