Future City: Sonder’s deep cuts
Suit and sour
An ex-Better.com executive is suing her former employer, alleging that the digital mortgage lender misled investors to retain their support for its still-pending SPAC merger.
The suit, brought by Sarah Pierce, ex-executive vice president for sales and operations, alleges management wrongfully pushed her out for raising concerns about a profitability forecast executives gave to the board and investors. The company, which lost more than $300 million last year, would not likely be in the black until at least the second half of 2022 — not, as management claimed, by the end of the first quarter, according to the complaint.
In a curious twist, the suit also alleges the company’s controversial CEO, Vishal Garg, told colleagues the long run of low interest rates — a boon to the company’s business — would continue because President Biden would die from Covid-19.
The legal spat adds to the company’s already heaping plate of problems. A beneficiary of the pandemic-era boom in home prices, Better.com’s business has taken a big hit from rising rates in recent months, forcing at least three significant rounds of layoffs. Garg’s reported callous handling of them generated its own public relations conflagration.
Better, in a statement, vowed to “vigorously defend” itself. “We have reviewed the claims in the complaint and strongly believe them to be without merit,” the company said.
Mean, but lean
Speaking of layoffs, the short-term rental startup Sonder cut one-fifth of its staff, including chief technology officer Satyen Padella.
The layoffs, which impacted seven percent of its “front line” roles, are part of a restructuring designed to trim $85 million of annual expenses and help the San Francisco-based company reach positive quarterly free cash flow, without any additional funding, sometime in 2023.
The company, now leaner, plans to grow its business by opening already contracted units while cutting back on new signings and “raising the bar” on its standards. Sonder is also slowing its planned geographic expansion.
The downsizing comes just five months after the company’s public debut via a SPAC merger, which valued it at $1.3 billion.
Sonder, whose stock has declined more than 80 percent since going public, reported an estimated $83 million loss in the first quarter as a result of ballooning expenses. It will record $3.5 million to $5.5 million in one-off costs to effect the restructuring.
STAT OF THE MONTH
Venture capital firms have invested $5.5 billion in equity capital into proptech in 2022, through May.
Down but not out
The ongoing tech rout has been brutal to real estate technology names.
Proptech stocks have fallen an average 30 percent this year through June 6, compared to a 23 percent decline in the Nasdaq Composite and a 14 percent drop in the S&P 500, according to the investment bank Keefe, Bruyette & Woods.
Proptech SPACs have been hit even harder. The cohort is down 56 percent this year, and more than 60 percent of them now trade below their $10 per share buy-in price.
The pace of IPOs and SPAC mergers meanwhile has slowed considerably from the 2020 and 2021 boom. This year has seen only one deal announcement: the single-family rental marketplace Appreciate’s merger with PropTech Investment Corporation II, real estate investors Joseph Beck and Thomas Hennessy’s second SPAC.
“Despite the slowdown, we continue to expect the landscape of public proptech companies to grow,” KBW said.
Proptech firms’ actual business hasn’t been so bad. Public companies’ revenue more than doubled year over year in the first quarter, led by the iBuyers.
Fundraising is also up substantially this year, though it has slowed with recent macroeconomic volatility. Venture capital firms had pumped $5.5 billion in equity financing into proptech companies through May — a gain of 18 percent year over year — with seed and early-stage companies the main beneficiaries.
Who’s driving this thing?
The forklifts of tomorrow probably will be driven by R2-D2.
Teleo, a Palo Alto-based startup that claims to be able to turn any piece of construction and mining equipment into a semi-autonomous robot, raised $12 million in a Series A round led by UP.Partners.
The company will use the funds to scale and develop its so-called Teleo Supervised Autonomy technology, which allows a single operator to control multiple pieces of equipment from a remote station. The company claims its offering enhances safety and helps solve the issues of labor and low productivity. Its ultimate goal is full autonomy.
Teleo also recently partnered with the supplier RDO Equipment, one of John Deere’s largest dealerships.
F-Prime Capital and K9 Ventures, among others, also participated in the Series A round.
• Cove, a firm that makes software integrating building management and the “tenant experience,” raised $10 million from Blackstone and others.
• Constrafor, a construction tech platform that streamlines invoicing and payment for subcontractor work, secured $6.3 million in equity and $100 million in debt financing.
• Pulley, a startup that wants to streamline construction permitting, raised $4.4 million in seed funding.
• Setpoint, a company that builds software enabling “frictionless” home buying and selling, raised $615 million in debt capital and launched its platform.
• iBuyer Opendoor’s mortgage brokerage subsidiary launched a new financing app allowing homebuyers to shop loan options.
• Rhove scored SEC qualification for its app allowing individuals to make fractional investments in commercial real estate properties.
• Rezi, the online rental platform, launched in the Washington, D.C. metro area.
• Seattle-based Sustainable Living Innovations, a technology company that designs “tech-enabled” buildings, engaged Sharc International Systems, a Canadian concern that specializes in wastewater heat recovery, for six new construction projects.
COMPANIES AND PEOPLE