My Proptech Startup Makes $960K/Year Helping People Save Money On Their Mortgage
Hello! Who are you and what business did you start?
Hi reader! My name is Alex Leduc and I’m the Founder and CEO of Perch. We’re a real estate tech company based in Toronto, Canada and we offer our service to all provinces across the country. At Perch, our mission is to empower Canadians to make more informed decisions about their real estate. We love helping buyers become homeowners, and helping homeowners optimize their finances and grow their wealth.
We use technology and automation to give our users in-depth, personalized insights throughout all aspects of homeownership, from buying, to mortgage renewals and refinancing so they can make their next move with confidence. Best of all—it’s free to use!
For most of us, buying a home is a really big deal. Especially for first-time home buyers, it can be hard to figure out what you have to do and in what order. Our analytics platform walks you through every step of the way, so you’re given the information and timeline you need to make the right decision. We answer questions like “How much ‘home’ can I afford today?” and “How long will it take until I can afford my dream property?”
Homebuyers who are ready to make an offer can get a mortgage pre-approval online in less than an hour. After signing up and submitting your details, you’ll be able to instantly view the mortgage offers available to you. The entire application process can be done online.
Complete your pre-approval and get your mortgage approved in less than 48 hours. This means not having to wait around for someone to call you back, or needing to travel to a bank or credit union to fill out paperwork.
For homeowners, Perch will automatically monitor the mortgage market and let you know when there’s an opportunity to save money by switching mortgages. You’ll also be able to view your monthly property value and mortgage balance updates. Best of all, we can show you exactly how much home equity you could unlock by refinancing and see your property returns as easy as you’d track your stock portfolio.
The average Perch user saves $1,500 per year on their mortgage, compared to going with a bank. Perch has recently raised $1 million in seed round funding and was recently selected to join the 2022 REACH Canada accelerator program, operated by Second Century Ventures, the strategic investment arm of the National Association of Realtors®.
What's your backstory and how did you come up with the idea?
I spent seven years working in the financial sector and in that time, I saw how broken our system was, especially in the mortgage and real estate industry. Too many companies were still heavily reliant on paperwork and operating inefficiently.
A lot of time was wasted between different parties through coordinating, providing status updates, and following up. Customers didn’t have equal access to the same information. They were having to trust financial advisors, brokers, and mortgage specialists at banks without being able to see the numbers for themselves and understand if they were making the right decision.
There was a pessimistic outlook for home buyers, where increasingly, Canadians viewed homeownership as an unattainable goal. Those who were approaching retirement, or already retired, lacked sufficient liquid assets to fund their golden years. Unfortunately, this meant people would rely on tapping into their home equity to get by.
After confirming that no other company was addressing these issues holistically, I set out to do it myself in 2018. The first product we built was, well, not great. Initially, we created a fully automated solution to allow users to independently compare and select a mortgage.
We soon had our first “aha” moment, when we realized people weren’t willing to make such an important decision without having the ability to consult a trusted advisor for 1:1 support, so we adapted. Today, Perch offers home buyers and homeowners a proprietary analytics platform that is supplemented by a dedicated advisor that helps them strategize and figure out the best path forward.
We’ve been fortunate so far, most people are incredibly supportive if given the right opportunity to provide feedback. I started with friends and family first and sought out the ones most willing to give honest criticism. When I was finally ready for the next step, I spent money to drive traffic to our website and made my contact info readily available so users knew who to complain to. I learned where things weren’t going according to plan, and worked with my team to make the necessary changes.
Take us through the process of designing real estate tech service.
Once I had the idea, I needed to validate it. I put in about $20,000 of my capital to develop an MVP, which mainly paid for a freelance engineer I found on Upwork overseas. I had zero consideration for design and was more interested in if the user found the outputs and functionality to be useful.
Once I had the prototype, I went through my immediate network to see if anyone could spare 15 minutes of their time for a demo. That gave me 15 initial testers that went through the product.
I didn’t pick people like my mom who would tell me the platform was awesome no matter what but rather relied on people I knew a bit less formally or that I knew would give me honest feedback. It was great to get their feedback so I could solve the biggest issues upfront. With no regard to design, the user experience was awful so I had to be super hands-on in guiding them through the platform when testing.
After doing the first batch of testing and making some overhauls, I invested another $30,000 in designing and engineering to improve it. With this improved MVP (2.0) I then took it for more informal feedback from strangers. I would literally go into places like food courts and search for someone eating lunch alone and then ask them if they had 10 minutes to demo and provide feedback.
I’d pick food courts that were in the basement of huge tech companies to increase the chances I ran into someone who worked on a software platform to improve the quality of feedback received. Surprisingly, most people were pretty receptive and open to walking through my demo. I was able to get another 10-15 testers to validate that I was onto something.
Early Platform Screenshots (mid-2018), formerly known as Mortgauge before our rebrand to Perch;
Describe the process of launching the business.
I’ll break down what the costs to get to the launch date looked like:
Getting incorporated ($2,500): Setting up the corporation is simple, but then you need legal counsel to get things like your bylaws, shareholder agreement, etc. in place. This is extremely important! To raise capital, later on, things like the IP belonging to the business and the right shares being issued need to be handled correctly the first time around. With that being said, you also don’t want to go into overkill by hiring a $900/hour lawyer and spending $10,000+ on doing this. I used a service called Clausehound, which gave me free access to templates and enabled me to draft my rough copies of all legal agreements. I then had to legally validate what I wrote and did one round of edits to minimize my legal costs to around $1,500 for all required documents.
Note: You need to do this as early as possible. Most accelerators or grant programs need you to be incorporated to qualify and later on when you want larger grants, they look for at least 2 years incorporated.
Trademark application ($2,000): I can tell you now that it was a complete waste of money/time. I filed my trademark in early 2018 and didn’t get a response until late 2020 and by that time we were already gearing up to rebrand. You don’t need to worry about this upfront.
Product MVP ($50,000): Described above, this was about 5 months of development work and 3 months of design work.
The main thing I’ve learned is that the equity you retain in your business is commensurate to the pain/risk you can take on.
So overall, my total costs from starting up a business to launching were around $55,000.
How did I finance all of this?
- Credits: By joining MaRS and Communitech (research innovation centers specific to my area) I was able to leverage a lot of services to help me reduce costs. Discounted legal/accounting advice, $30,000 in AWS credits, 90% off HubSpot, free-market research, etc. In the first year, 80% of my opex was strictly contractors.
- Loans: Futurpreneur provides a $15,000 loan that is fairly easy to qualify for. I had a great credit score and no other debts since I was previously working full-time, so that helped me get favorable terms.
- Capital: I was able to fund the initial startup capital with my savings. The biggest cost that isn’t accounted for here is the “opportunity cost” in the sense that I made $0 for the work I put in, even if I was working 80+ hours a week. Sweat equity was by far the biggest contribution I made and you should expect it to also be yours.
- Grants: I was able to get $10,000 from the OCI for my designer hire.
We went live to the public in September 2018 and I wanted to use paid channels as the first channel to get my initial customers and I aggressively priced my product to entice someone to try it with no brand recognition.
The first thing I learned is that a low price will never trump a bad user experience. If I solely relied on the site to convert, I would’ve had zero clients. The one thing that made a massive difference was making sure my phone number was easily visible and that I got their info as early as possible so I could reach out. Getting people on the phone and getting feedback on the product was fundamental in helping me rapidly iterate on the product and keep improving.
My goal was never to flood the site with traffic, but rather to keep a steady stream of people coming in so that I could keep testing my product and getting feedback in a measured and controlled way. If anything, my worst nightmare was having my site go viral and then having tons of people access the site when we couldn't support them all, which could lead to damaging the brand.
The team was 3 people (me, an intermediate engineer, and a junior designer), so we had to pick wisely on where we spent our efforts. My product also requires consultation as a mortgage broker, so I wasn’t in a position where I could handle 100 clients at a time.
Original Mortgauge Launch Site (early 2019);
Since launch, what has worked to attract and retain customers?
For anyone that’s thinking about starting a business, I always recommend expanding your network beyond just your immediate role. For example, attend networking events where not everyone has a similar background to you. My background is in finance, so I had the ‘fin’ but none of the ‘tech.’ To overcome part of this knowledge gap, I signed up for online courses and dedicated myself to reading as much as I could so I could “speak the language” during the hiring process and when working with my entire team.
Since launching our free analytics platform to home buyers and homeowners, we’ve enjoyed a 174% customer referral rate. Many of our new customers first hear of Perch through word of mouth. Early on, we realized it just didn’t make sense to spend a lot of advertising dollars if we didn’t have a good product that people wanted to use. What’s worked for us are our strong referral partnerships, which translate into higher quality leads than any ad campaign ever could.
For example, we enable satisfied customers to earn through our referral program: If they refer a friend who signs up to Perch and gets a mortgage through us, we offer them 10% of our gross commission as a referral bonus. Similarly, we offer real estate agents a referral bonus when they refer home buyers who get a mortgage through our platform.
When it comes to retaining and re-engaging our users, we invested a lot of time into ensuring our drip campaigns were delivering relevant and timely messages to customers.
To be successful, you need to have a unique product.
In addition, we reiterate our service commitment to them by focusing on quick response times with our base (in other words, no long hold times or spending days waiting for an email reply). As much as we rely on our analytics platform to guide users through shopping for rates and the mortgage application process, we know there are times they just want to speak to a human. Because we don’t want to compromise on our customer service, we constantly think about how to maximize operational efficiency and sustainably grow our business.
Finally, we consider ourselves very fortunate to have a vocal customer base. They have left us 5-star reviews on Google, provided us testimonials to use in our marketing, and are quick to let our advisors know when they need help or if something is going awry.
How are you doing today and what does the future look like?
Since that first launch, we’ve learned a tremendous amount from our users and our product has come a long way. Some key stats:
- Team was 3 people (including myself) up until mid-2019, we are now 12 and will be 15 by the end of 2021
- We’ve doubled our customer lifetime value while maintaining a constant customer acquisition cost
- Average annual revenue growth of 226% since inception with YoY revenue growth of 115%.
- 303% annual user growth since inception with YoY user growth of 628%
- We’re on track to be profitable by mid-2022
The velocity of our growth was fairly limited as we largely bootstrapped our way up to where we are today (only a small circle of friends & family round). Over 80% of this revenue has been organic or through user referrals, not paid ads.
We now have big plans for the next year:
- Closed a $1 million seed round to give us growth capital
- Hired growth, marketing, and sales staff to increase our user growth and conversion
- Joined the REACH 2022 Canada accelerator to build on Realtor partnerships
- Hired more engineering and design resources to further improve our product and conversion
Through starting the business, have you learned anything particularly helpful or advantageous?
The main thing I’ve learned is that the equity you retain in your business is commensurate to the pain/risk you can take on.
If you want to be the sole founder, you better be able to have the skillset and bandwidth to perform 2 full-time jobs effectively. You also need the mental fortitude to go through this on your own, which is a lonely road.
If you want to defer raising capital to avoid early dilution, you need to have enough capital for your runway or a viable plan to make it happen. This includes your personal life as well as your business. When I started I paid no rent (my amazing wife covered it), had no debts and no kids, which enabled me to go 1.5 years without any salary. This also relates to time. Can you work 80-100 hours a week without having your personal life fall apart?
Overall, the key thing here is to be realistic. Not everyone is in a position where they can grind out 80-100 hour weeks for 2 years without a salary. This doesn’t mean you can’t start a business, it just means that you will need to split more of that pie upfront to get the resources you need to make it happen.
I don’t regret bootstrapping the company as far as I got, but if I had to do it all over again I definitely would do it with a co-founder. Not only from a velocity standpoint, but a moral standpoint it’s so much to go through, and going through it with someone else would make the journey less brutal.
As it relates to my MVP and initial validation, knowing what I know now, I would’ve probably only started with a designer and no engineering. The sophistication of prototyping on tools like Figma is beyond what I imagined and would enable a user to provide feedback almost equivalently to if they tried the product you engineered. This could’ve cut down my MVP cycle from 8 months to around 3-4 months and saved me over $25,000.
What platform/tools do you use for your business?
Perch is a fully remote startup with employees that are across Canada or in India, in multiple time zones. Because of that, it’s pretty key for us to use tools that enable the team to work collaboratively, efficiently, and are user-friendly. Most importantly, as a growing prop-tech startup, the platforms and tools we use need to be able to scale as we increase the number of employees and customers. Here are some of our favorites:
- HubSpot: The flexibility of HubSpot’s platform, the ability to tie in Operations and Marketing functions, and the comprehensive HubSpot Academy training material are a few of the reasons why we chose to work with them. Their workflows (automated emails) have saved us a ton of time when following up with customers and their API is extremely flexible.
- Jira: With a lot of moving pieces, and the speed at which we work, we need to be able to track tasks cross-functionally and hand things off to a coworker without always needing to default to a meeting or lengthy brief. Jira is great for this!
- Slack: A work collaboration platform that’s easy and fun to use. While a lot of our work is completed asynchronously, having Slack is like being able to tap a coworker on the shoulder when you have a quick question. Best of all, a large suite of integrations with our other tools helps employees with their productivity.
- Google Workspace: Given how popular Gmail is, a lot of our new hires come into Perch already having some familiarity with Google Workspace. This knowledge expedites their onboarding process with us and allows them to pick things up much quicker.
- Power BI: Let’s face it—not everyone is going to be a numbers guru who can build out their models and forecasts. Luckily, PowerBI helps make data visualization more accessible to employees across the company. By having our data more readily available, it helps to hold people accountable and gives them the confidence to make the right business decision.
What have been the most influential books, podcasts, or other resources?
I’ll admit that early on in the business I had way more time for these things when we weren’t yet live and I only had 1-2 other staff. My background was in finance and I had never worked in tech, never worked with anyone in engineering/design/product/growth, or run a business (other than side hustles). I had a lot of blind spots that I set out to hopefully learn more about so I went on a binge reading spree during my workouts (tablet on the spin bike) and burned through 12 books in a few months. Some of my favorites:
- Principles (Ray Dalio) helped me explore what kind of company and culture I wanted to have and some useful insights into running a business and being a leader.
- 4 Hour Work Week (Tim Ferriss) opened my mind up to optimizing my work schedule, beefing up my time management, and then also focusing on what matters
- Learn Startup (Eric Ries) helped me understand what a product development cycle looks like, how to organize a team around that and how important having metrics is.
- Hooked (Nir Eyal) helped me understand what a product needs to have to be successful beyond features, how users interact with a product, and how I should test for success
- The Hard Thing About Hard Things (Ben Horowitz) helped me grasp the kind of things you’ll encounter running startups and think through how I’d want to handle it. It also had solid tips on building your operations to be set up for success.
- Hacking Growth (Sean Ellis + Morgan Brown) outlined how you should approach growth experiments and prioritize your time. It also explained who you need on a growth team to be successful.
Advice for other entrepreneurs who want to get started or are just starting out?
To be successful, you need to have a unique product. We focused on making sure we were truly solving our users’ problems. With Perch, I knew we had the right product fit when people started saying things like ‘I’ve never seen anything like this!’ or ‘I can’t believe no one else is already doing this.’ (P.S. if you ever want to validate a startup founder’s feelings, just keep repeating those lines to them!)
Starting, we used freelancers and contractors to build our MVP which gave us flexibility without having to commit too much capital. I’ve also quickly learned the power of prototypes. At Perch, we use Figma to design prototypes and test the product-market fit with our target users before ever writing a single line of code. Doing so saves us from having to do a lot of rework and wasted effort.
Don’t forget to take advantage of government grants or grants from organizations that serve startups and entrepreneurs. A lot of times these grants can help you with hiring the resources you need much sooner. If you’re not sure where to start, try contacting a local university or college with a strong co-op or internship focus. Typically, they will be extremely well versed in available grants to enable startups and small businesses to hire their students, and are very willing to share their knowledge with a potential employer!
Are you looking to hire for certain positions right now?
We’re always open to connecting with curious and creative people. Our current job postings are always available on LinkedIn. Not seeing any posted positions that could be a fit? Send us your resume, along with a quick line about the type of role you’re looking for. [email protected]
We’ll keep your resume on file and reach out if it makes sense to connect. Thanks for your interest in joining our team!
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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