Employees at power buying firm Ribbon are the latest to feel the sting of the housing market slowdown. On Monday, the Shaival Shah-helmed firm laid off 170 employees, or 85% of its staff.
According to an emailed statement by a Ribbon spokesperson, the firm will now “be led by a lean and focused team of just under 30 people.”
The impacted staffers were notified via individual emails sent Monday. Employees at the firm had been anticipating more layoffs after receiving an email from Shah on November 15, which warned of “deeper” layoffs in the near future, as first reported by Business Insider.
The layoffs were company-wide and impacted most teams and departments.
“The impact to teams was broad, with no specific emphasis outside of assembling the leanest possible team to build what the industry needs now, where and how we best meet them, and what Ribbon looks like to do that best,” the spokesperson wrote.
Impacted employees will receive pay through December 1 and health insurance coverage through the end of the year. The Ribbon spokesperson wrote that the reduction in force was the first step in a “rebalance.”
“Our path forward is rooted in focusing on concepts that add more dexterity to the portfolio of homeownership offerings, to complement our flagship RibbonCash offerings,” the spokesperson wrote. “This has been a perfect storm of higher interest rates paired with depressed markets for proptech. That has been a shock to the system. To put this into perspective this company had achieved 30x growth from 2021 through mid-summer 2022. Tightening financials, and a drastically shifting market, combined into a situation far beyond our scenario planning.”
This is the second round of cuts at the firm in the past four months. Over the summer, Ribbon cut 139 jobs, or about 40% of its staff at the time.
“As a leadership team, we have tried to delay this decision for as long as possible, but we are not immune to what we have been seeing elsewhere in the market,” Shah wrote in a statement in early August. “The market conditions exposed areas that need improvement across our product and team to evolve with the changing consumer. I am ultimately responsible for all those decisions and this decision, as a result. The next phase of Ribbon will be more agile. We needed to define the team and systems to make this plan happen with operational excellence for the next several years.”
In addition to cutting staffers, Ribbon has also suspended its cash offer service program, according to Inman.
Founded in 2017 by Shah and chief technology officer Wei Gan, Ribbon has raised over $900 million in funding, with investors including Goldman Sachs and Greylock. But, as the housing market has slowed, Ribbon and other power buying firms have struggled to find their footing in the shifting market.
The power buying model is designed to give buyers an edge in a highly competitive market, but as homebuyer competition cools, fewer buyers feel the need to utilize various cash offer products. In addition, the power buying firms, like Ribbon, lack brand recognition among consumers they need to reach, and the cash fronted by VCs is finite.
“When you have the kind of market we had in 2020 and 2021, which was highlighted by extreme scarcity of inventory and rapidly advancing prices, if some entity can step into the middle of that and provide instant liquidity for either someone who needs to sell before they can buy or a first-time buyer that can’t compete against all cash offers as they have contingencies on financing — the companies that can help with that should do very well in that kind of market,” Steve Murray, the co-founder of RealTrends Consulting, told RealTrends in September. “They are filing a market need because of the market imbalance between sellers and buyers. It goes without saying, therefore, that if you ease that market pressure by bringing inventory more into balance with actual market demand, then the demand for those people who provide liquidity would go down.”
According to Murray, companies like Ribbon needed to find creative ways to boost their profiles if they wanted to weather the impending market storm.
“What Opendoor did with Zillow, in my view, is they decided to secure their future as one of the survivors,” Murray said. “So now if I am one of the others, like Orchard or Ribbon, I go see if I can team up with Realtor.com or one of the large national real estate organizations or a regional brokerage or a large real estate team. They will need marriages of people with these services because there needs to be a way for the firms to distribute their products and the best way is through brokerages and agents.”
But even Opendoor has struggled in recent months, laying off 18% of its workforce in early November after recording a nearly $1 billion net loss in Q3 2022.
Despite being in rather uncertain waters, Ribbon has continued to expand in recent months, launching in Michigan, Arkansas, Illinois and Colorado in September and October, but the spokesperson noted that these plans were in place prior to the market slowdown and that there are no immediate plans for further expansion.
“We firmly believe that the open model Ribbon has relied upon – not competing with agents or lenders, but working with and empowering them – is still the most scalable and urgently-needed approach. We intend to continue this open-model approach,” the spokesperson wrote.