How I Built a Successful Digital Mortgage Startup in Canada

Hi readers, I’m Alex, and I’ve built my company Perch from the ground up over the past 4 years, and we just finished our latest Series A funding round of $4 million. Perch is a digital mortgage company. We make money helping people get their mortgage quickly, simply, and at the best rates they qualify for, while providing insights and tools for them to make the best decisions.

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 easily as you’d track your stock portfolio.

The Fintech Startup Playbook

I’ll break down what the costs to get to the launch date looked like. Note since we’re a Canadian company, the dollar amounts are listed in Canadian dollars.

1. Getting incorporated ($2,500)

Setting up the corporation is simple, but 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 must be handled correctly the first time.

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 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.

2. Trademark the 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.

3. Product MVP ($50,000):

As described above, this was about 5 months of development and 3 months of design work.

I’ve learned that the equity you retain in your business is commensurate to the pain/risk you can take on.

How Did I Finance All of This?

Credits: By joining MaRS and Communitech (we’re based in Canada, and these are 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.

1. 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.

2. 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.

3. Grants

I was able to get $10,000 from the Ontario Centre of Innovation (OCI) for my designer hire.

The Startup Lessons

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, 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.

How to Attract and Retain Customers

For anyone who’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.