Few businesses have managed to completely escape the current economic situation without feeling some change or pressure. However, the real estate industry is feeling it more than most, especially when it comes to startups that have to worry about bringing in money. Reali is no different.
Back in 2020, many things changed. Among the changes were historically low interest rates that sent people flooding toward the housing market. People wanted to take advantage of the rates to adjust their loans or purchase a new home. Moreover, with the rise of people staying and home and remote work, homes became a true focal point.
Because of the boom, businesses needed to adjust, with companies like Reali and Better.com doing their best to keep up. However, the boom did not last, and in today’s market, things are not quite as relaxed.
Mortgage interest rates began to rise in 2021 and have continued to climb. The increase in rates, just like the previous decrease, affected the market. Facing the rate hike, many of those looking to buy started to have a change of heart. Suddenly, the measures taken to keep up in 2020 turned from necessity to detriment.
That is the reason many startups dealing with real estate have been forced to lay off employees. But it is not the only reason. Along with the decrease in buyers came a decrease in funding, which hit companies like Reali hard.
While Reali received major Series B funding of $100 million in August 2021, it still faced challenges. The company was forced to reduce employees from 180 at the time of the funding to 140 recently. And now, the company has announced a full shutdown, which will result in it laying off most of its remaining employees by September 9th.
The co-founder and chairman Amit Haller attributed the decision to challenging conditions in both real estate and the financial market. He also cited an unfavorable capital-raising environment, which is something many startups currently face.
Of course, bad market or not, it begs the question of how the company burnt through so much cash in such a short time. While there are no clear answers, it all points back to spending for short-term gains, such as adding employees to deal with what ended up being a short-lived uptick.
On the other hand, Reali also faces a good deal of debt to go along with its spending habits, which has resulted in the company looking to sell off pieces of itself. There is even some interest.
But Reali is not the only company to suffer in the real estate sector after making rash hires in the past few years. Better.com’s CEO admitted to hiring too many people, which resulted in losing hundreds of millions and led to the layoff of many employees. Another startup, Homeward, also ended up laying off 20% of its workforce recently.
So, while Reali’s choices and the current market sent it down the path of closure, it might not be the only one if things continue the way they are.