The untold story behind the collapse of proptech unicorn Veev
The untold story behind the collapse of proptech unicorn Veev
The startup only received $200 million of the $400 million it announced it raised in its Series D last year and is now undergoing liquidation, with home construction giant and investor Lennar tabling an offer to fund the company's ongoing activities
Power struggles lie beneath the closure of proptech unicorn Veev, a company founded by Israeli entrepreneurs that raised hundreds of millions of dollars. Earlier this week, real estate giant Lennar, with a market cap of over $40 billion on the NYSE and the largest investor in Veev through its investment fund LEN X, submitted an offer to acquire the company's assets as part of the ongoing liquidation procedure initiated by Veev last week. In the initial stage, Lennar proposed financing the company's current activities, with future potential plans to acquire Veev's entire operations, including its employees in Israel. On Sunday, the company, employing around 250 workers in total, announced significant layoffs, retaining only its operations in Israel.
In March 2022, Veev, which developed a system that leverages a proprietary panelized approach to produce fully cladded walls, complete with mechanical, electrical, and plumbing (MEP) solutions, reported a substantial $400 million funding round led by BOND, boasting a market capitalization exceeding $1 billion. However, a significant gap emerged between the reported agreement and reality. In practice, the company received only $200 million, with the second phase of funding slated for March 2023. The first phase aimed to establish a new manufacturing center to replace smaller ones, but amid rising interest rates and changing real estate dynamics in the United States, Veev pivoted away from high-rise residential construction, recognizing a demand shift towards private homes.
Following extensive discussions and an agreement with the board of directors, Veev decided to freeze high-rise construction activities and focus on private homes. Some major investors, including Lennar, subsequently announced they would not transfer their part of the second $200 million investment, proposing instead an internal fundraising round of $120 million to provide the company with a longer runway.
Veev executives, caught off guard by the cancellation of the second phase, reluctantly accepted the internal fundraising offer due to a lack of alternatives. However, the internal recruitment process, initially expected to be swift, encountered delays.
Veev began its journey with loans valued at approximately $25 million, used to purchase various properties. Surprised borrowers turned to Calcalist this week when they learned about the company's liquidation process.
To address borrower issues, Veev sought a bridging loan from investors, who initially agreed. However, after the loan documents arrived, Lennar, the main investor, decided to withdraw its offer, urging the company to undergo liquidation instead.
A liquidation purchase would allow the Israeli company to continue operations, employing its workforce, but at the cost of wiping out all investors, with minimal returns for lenders.
The withdrawal of the bridging loan presented Veev with a financial challenge. Despite being technologically sound with a promising future, the company lacked funds to sustain activities, obliging it to enter liquidation per California state laws.
Veev stated, "Veev was in the process of raising capital which was canceled at the last minute. In light of the current market situation in Israel and around the world, it was not possible to raise money any other way, and therefore the current entity of the company will be closed in the coming days and transferred to an assignee. In the meantime, until a buyer is found for the assets, the company's activities will continue. At this stage, the company's employees in Israel will continue to work. We are unable to comment on the claims made in the article right now; all our energy is currently focused on taking care of the interests of the investors and employees."
Veev was founded in 2008 by Amit Heller, Ami Avrahami and Dafna Akiva. Heller and Avrahami are also behind Israeli-founded real estate platform Reali which ceased its operations last September.
Last year’s funding round was led by BOND with participation from LEN X, Zeev Ventures, Fifth Wall Climate Tech, and JLL Spark Global Ventures.
Veev raised $100 million through the Tel Aviv Stock Exchange’s TASE UP platform in March 2021. Investors included leading Israeli institutional investors, including Migdal Insurance, Psagot Investment House, More Investment House and Shavit Capital, all of which didn’t participate in the latest round.
Lennar did not respond to Calcalist's request for comment.
