Alex Leduc, CEO of Perch, recently sat down with Darrell Keezer from CandyCast to talk about what it’s like to grow a company, while facing the business impacts of the COVID-19 pandemic. You can listen to the full episode here or read the transcript below.
Darrell Keezer: Welcome to Season 2 of the CandyCast podcast. I'm Darrell Keezer, CEO of Candy Box Marketing. During this season, I'll be interviewing CEOs from various industries that grew rapidly during the pandemic. I'll be trying to find out how they rose to the top while many of their competitors shut their doors. Grab your favorite candy. Sit back and enjoy.
In today's episode, I'm going to be interviewing Alex Leduc, from Perch. During the pandemic. He went from five employees to 14 employees, and crossed the $1M revenue threshold.
Darrell Keezer: First off, thanks so much for coming to the show today. I’m really, really excited to hear your story. You know, we met online on LinkedIn and we had our first conversation. I was just blown away with what you guys are doing in your growth and so for the audience, it would be great to introduce yourself and your company and talk about what Perch does.
Alex Leduc: Thanks for having me. It's awesome to be here. My name is Alex, and I’m the Founder and CEO of Perch. We’re a homeownership real estate ecosystem. We effectively help Canadians do two things. The first one, which is top of mind for a lot of people, is getting into their first home and helping them find the fastest way to get there. And the second one is actually helping them build wealth through real estate after they buy their home.
Darrell Keezer: Awesome. You know the marketer in me says, if I am looking to buy a home and I'm looking at advertisements and TD and RBC and CIBC are all saying the same things, like—‘Hey, we're gonna help you into your home. We’re going to help you build wealth.’ How are you guys different?
Alex Leduc: Great question. So 60 to 70% of Canadians will typically go to their bank and like, they just look at one mortgage option. We operate as a brokerage model, so we actually have access to 25 lenders.
They all have different products, but we've built an optimization algorithm that essentially looks at what is specific to each person’s situation, and then figures out where you should go and what you can do. And essentially, we can cut three year buying time horizons down to, let's say, six months or even less, since in some cases you might not meet one bank’s lending requirements but you could meet those requirements at another lender.
Darrell Keezer: So your value proposition is you have the technology that helps people find the right solution based on their situation. It's not like you're a broker representing only one or two options. What do you build, is it like a platform? Is it within a website? What does that look like for me as a consumer?
Alex Leduc: Yeah, it's a web app. It’s all online, it's a fully digital experience, and we use the technology and the analytics to help guide you through the process. But then we also have our mortgage advisors that are there to reinforce and help you through that process as well.
Darrell Keezer: I mean, this has got to be a very popular thing because home ownership and first time buyers, it’s a massive thing within Canada, within the GTA, and housing affordability, right? You hear about it in the news every single day. It makes sense. In leading your company, what have you seen your platform do for people that a bank couldn’t do?
So if you're saying, ‘Hey, here's a case study of how somebody got into the market where they were not able to before.’ What does that look like? It's not like there's some magical loan out there, or like, I don't even know what it looks like. What types of options or situations do you see that are very unique to your platform?
Alex Leduc: So I can think of a couple examples offhand. Let’s say, you have an insufficient credit score. This is somebody whose credit score was a bit damaged during the COVID-19 pandemic.
They took on a lot of debts, to essentially cover the shortfall. They had a job loss for a period of time, so they racked up a bit of debt. We actually have some lenders that offer a cashback product so you can clear out those debts.
So in a normal situation, if you go to your mortgage lender and they say, ‘Your debts are too high, you don't qualify on the ratios.’ But, if you pay out the debts, then there is enough capacity for you to then qualify. So we were able to take her from what was about $350,000, which is what the bank told her she qualified for, and we got her up to about $550,000 and she was able to buy a condo. She’s there now, and couldn't be happier.
Another situation is somebody with not a lot of income on paper. It’s very common among self-employed individuals to not fully pay out their business earnings. With certain net worth programs, with some of our lenders, we’re able to use a lot of the liquid assets that they already own outside of just their income, to increase some of their buying power.
So we have somebody who could buy instead of a $400,000 mortgage, they could get up to, like $800,000 or $1.2M.
Darrell Keezer: So your technology really looks at all the variables of a person, then it’s taking a look at all the different options and marrying them up, right?
As opposed to a normal mortgage broker, that has a particular profile that they’re really good at working with. Here's a couple lenders that I know have these programs, you're actually expanding all their options so that you can look for new stuff. That's really cool.
Alex Leduc: Yeah, the traditional way of doing it is someone will go through the same checklist of things and then go through all the lender products, and really do this manually. We have access to 25 different lenders, and we have access to over a thousand mortgage options.
Since each lender has so many different products and variables, our system will optimize those options immediately. So now you're actually able to get all these insights as a user, within two minutes, without having to talk to anybody. Then the broker or your mortgage advisor helps you solidify the plan you've chosen.
It immediately gets you thinking about all things that were possible. Because a lot of people are pretty pessimistic about ever achieving home ownership. But we're able to open the door and go, ‘You know what, this is actually a pretty realistic target that you have,’ and then getting them to think about it, locking down a plan and taking action on it.
Darrell Keezer: Unbelievable. Well, I think that offering is a bit of a spoiler alert as to why you guys are growing. I mean that's just an incredible idea. Now, tell me about the beginning of the pandemic and how that hit you. I remember incorrectly stating that as soon as the pandemic hit, I was like you know what, everything is going to kind of lock up. We're gonna see houses lose, I think they were saying at the time, 15 to 20% of their value and that there is going to be an issue with lending. I was thinking, people aren't going to be getting into homes. It was almost like everything just paused. Tell me how that impacted Perch.
Alex Leduc: Yeah, I mean, everybody is a really good investor with hindsight, right? But I don't think anybody could have predicted the last year and a half that we've had in housing. It was on fire, like, way more than anybody thought. The first part of the shock was that, as soon as it hit, there was an overwhelmingly pessimistic view on housing across the country. To your point, there was like 15% to 20%, even some estimates of 40% to 50% price declines on the way, that kind of thing.
So purchase volumes kind of fell off a cliff, and it wasn't just because of market pessimism. It was actually reinforced by the technology gaps that a lot of people then found themselves in. You had realtors who had never used virtual showings, you had lenders who had never had to set up remote working for their staff.
That caused giant friction points all across the process. You had appraisers who couldn't come into the property, and things like that. So when you've got a process, that's usually already a bit lethargic, that's made chaotic, then it turns people off away from that process. When you take all of that, what we saw is that purchase volumes fell off a cliff, like, in the first three, four months in early 2020 and that really kind of made us go, ‘Oh, okay.’ So we were gonna really focus on purchase volumes initially. But then we found that wasn't at all where the market was. So we shifted our efforts, to focus on different revenue streams. What we found is when the housing market took a turn, market rates went way lower for renewals.
So we had an overwhelming amount of demand for people going, ‘Hey, should I break my mortgage and get a new rate?’ We also had a huge demand for refinances for two reasons. So some people refinance to cover, let's say, any job losses. So you can access the home equity to carry you through until your next job. A lot of people took a more bullish view than the general market, and refinanced their home to have that pot of cash ready to buy an investment property when the opportunity presented itself. And a lot of people did, and got in what arguably, as we know now is a really good price in early to mid-2020 and then kind of rode it out on the way up.
So we saw a complete change from before, when we were 70:30 purchase, refinance/renewal, and now it kind of flipped to 30:70, where we were able to make up revenue streams through there.
Darrell Keezer: So for your business, did you dip at the beginning and then recover quickly? What was that time scale looking like for you?
Alex Leduc: Yeah, so typically the purchase sales cycle, as it’s called, typically takes about three months. Actually, three to four months roughly. So you pre-approve someone. It usually takes about a couple months to find a house, and then it takes another 60 to 90 days to close.
Due to that, we were focusing on purchases, but they just weren't there at the beginning of the year. So there was a four to five month period where it was a bit slower, just because we didn't have purchase volumes coming in. By the time we were able to ramp up our efforts to focus on the partnerships, on the renewals and the refinance side, and also steer and change some of our features to proactively engage with consumers around, ‘Hey, you could save this much money if you switch your mortgage,’ or ‘You have this much equity available in your home? Did you need to access it?’ Then it came back really quickly. So by the second half of 2020, we were already well ahead of where we were last year.
Darrell Keezer: Tell me about your growth. What has the last two years looked like for Perch?
Alex Leduc: So at the end of last year, we were about five people. Today we're 14 people so it's been crazy. From a full time, employee standpoint, we've had a lot of demand. And that's caused us to ramp up a lot of things on the product side, the engineering side.
So as a tech company, we’ve scaled up all parts of our product development so we can increase the velocity to capitalize on what we think are a tremendous amount of opportunities out there. From a revenue standpoint, we've been able to grow more than 200% year-over-year.
So we're on track this year to crack our first $1M in revenue as a new company. We couldn’t be happier with how things are going right now, which is just a lot of good momentum that we're cruising through.
Darrell Keezer: That's awesome. I mean, I've heard this a number of times before where people speculate and say, ‘Well, that's amazing, Alex, right place, right time.’ And you just did well. But I never find that to be real, right? Like you've got real software, you've got real services, you've got demands, especially in the housing market, like everything is service and time-based. You can't really mess that up, you’re messing up people's futures in that case, how do you do it?
Alex Leduc: To your point, it's totally true. We didn’t just wake up that day and we're like, ‘We need software.’ This is a three and a half year old company, so we were already building towards a model that we thought was going to go fully digital. So the home buying process, the mortgage process.
We just knew that eventually we would get there. Where luck plays in is the fact that it accelerated how much people wanted to go there, how quickly they wanted to go there. So not just the user, who was now much more open to digital options than before, but every other involved party.
So the realtor who typically relies on a traditional model, now needed a digital alternative because that's all they were kind of stuck with. Even today, you still have properties going off the market in one day, two days, three days. We’re able to turn pre-approvals around in 20 minutes and then, a lot of other lenders or alternatives, are taking like three to five days.
There became this need for speed in a digital setting that then increased adoption. So we found it easier to get partnerships. We found it easier to get consumers. But most importantly, that enabled us to keep growing our product, as we increased our user base and our revenue stream to then keep adding features.
Darrell Keezer: And then going from five people to 14 people in. I mean from last year to here, that’s like 10 to 11 months tripling your team. How has that been?
Alex Leduc: So I've had to wear my HR hat a lot, which is interesting to bring in a lot of the right people.
Interestingly, we found a couple of our staff that were actual users of our product. They just really liked it and then the conversations started, ‘You know, if you guys ever need this kind of person, let me know.’ So I tapped them on the shoulder this year, I was like, ‘Hey, that time is now.’ So that was awesome to find some of those really key hires, as users who really believed in what we're doing. Other than that, it was just bringing in a tremendous amount of people.
Since being a fully remote company, we're able to hire across Canada. So we picked up some people in the GTA and Ottawa and Victoria and Vancouver. So we have grown our team, but it's made it a lot easier to not be stuck in a location where we can find our talent.
Darrell Keezer: It's a huge advantage where the playing field is leveled in regards to ‘I’m physically at this office,’ or ‘I'm with this startup remote company. I'm gonna be working from my kitchen. I'm not really sure if I can trust them.’ Right? It's all kind of leveled out. I mean remote work has been around for decades. We started fully remote. Then we went to an office, then we're hybrid, and we're still trying to figure it out, but it's amazing just to see the kind of advantage of going national, without really having to put a lot of equity down.
Alex Leduc: Absolutely. We were lucky because I know a lot of people were tied down by a new office lease or things like that. When it started, we never had an office. So it was just something that we were on the fence about, and this kind of sealed it for us. We found that remote work was a huge selling point for people. Like a lot of people were looking for remote-only opportunities, so we're like ‘Alright, if that's what the people want.’
Darrell Keezer: So during this time, what has been the hardest part of your growth? Has it been on the technology side? You mentioned that you feel like you’re a full-time HR person, but it sounds like you guys are building a really cool team. What do you feel has been the most difficult thing in tripling your company in that race to the first million dollars? From your perspective as a tech company, that was born before the pandemic, but really have had all of your growth because of the situation that we find ourselves in, what's been the most difficult thing?
Alex Leduc: I'd say there's an inflection point of growth. When you're five people, it's fairly easy to stay on top of everything, it's very easy to have an idea of what everyone else is doing. As soon as you cross that 10 to 12-person mark, you need a lot more process in regards to how things are done.
So it becomes a lot harder to oversee everyone directly. The big emphasis for me was to find really senior level people that can run entire departments. So, delegating a lot. But then also doing things in a way where we don't lose the focus that we had before, in the velocity and how fast we were releasing a product.
So I'd say there is an element of, there's so much opportunity that you want to capitalize on it very quickly, but then you're limited by how quickly you can capitalize on it. So that's really what prompts you to hire all those people, so you can capitalize on it.
But juggling all those things, at the same time and with regards to getting the capital, you need to have the runway to hire those people. But then also at the same time, then hiring the right people, but then making sure that they have enough coaching you spend enough time with them, to make sure that they're in alignment of what needs to get done and kind of what the product vision is and at the same time, maintaining customer service, so you don't want to take in, you know, 10 times as many users, and then give them all a really bad experience.
So it's a bit of a juggling act to grow at the right pace. That’s really how I’d sum it up. It’s finding that balance, where you're not too fast, in the sense, where things start to suffer or too slow where you’re not growing as fast as you need to be.
Darrell Keezer: I'm thinking of the episode of The Incredibles with Flash running that race. And then, at the end, you know, he starts running too fast and his parents are like, ‘Slow down, slow down,’ Now, you mentioned something interesting. A lot of times, when you’ve got a team of five, you’ve got a bit of a startup vibe, right? Younger crew doing something different, with remote working. And you're saying you’re bringing in senior people, and senior people is not always what those startups look for.
They kind of like, just fill in seats and just get somebody to do the job. And yet you're going for senior people, right away. Tell me what that decision making process was like for you? Because I know when you're hiring a senior person, sometimes you're literally giving up your pay cheque to somebody else to, hopefully, bring you to the next level, which is really high risk. So, what led you to that decision?
Alex Leduc: You’re totally right. It’s really hard to find somebody who's able to embrace the skill set. You need somebody who can oversee everything, but also roll up their sleeves and do a lot of it.
Because when you're a small company, you're not in a position where you need someone to just delegate and oversee. Everyone is all hands on deck, so that's really tough to find. I'd say that that's why a lot of these roles can sometimes take two, three, four, maybe even over four months to fill. I definitely have no regrets in that sense, because you're right, in the sense of you raise capital to give up part of your company, to make sure you can bring these people in.
But in my opinion, it's 100% worth it because you start seeing velocity, but it’s also the quality of what comes out. Anybody can go full steam ahead with three, four, five people. But once you go past that, you start seeing the ramifications of not having that senior person in it, because more junior staff still need that guidance and somebody that can help them grow professionally, which isn't me. So for example, I'm not a marketer, I'm not a designer, those are things that aren't really my skill set, so you can bring in people that are going to want to really be scrappy. But I wouldn't count out people that are more senior in their career as not wanting that as well.
Ultimately, what you really sell people on when they're at that stage of their career is the ability to have a lot of input over what it is they do, and be attached to what it is that they're actually doing. So, a sense of purpose of, ‘I'm actually solving a really huge problem. And everything I do is going to be immediately recognized and visible.’ If you're able to get those key things then everything else, almost becomes secondary.
Darrell Keezer: Wow. It's fascinating. I think a lot of people need to be kicked in order to kind of hire the right person, the next person, people with experience. Because you're right, when you're going that fast, you don't have the time to learn or to have failed projects, failed marketing and it's bold. It's really hard, you know, hiring people that are smarter than yourself to lead stuff. But, you know, I've heard the quote before, it's like if you’re the smartest person that’s in the room, you're probably in the wrong room.
It's a humble thing you've done, to make sure the right people are in to help you grow to the next spot. If you don't mind me asking, what mistakes do you feel like you've made over the last two years, and any mistakes that you look back at and say, ‘We missed this,’ or ‘We didn't do it as well as we could have,’ because everything's changing so quickly.
We make a lot of decisions on a regular basis. If you were to look back at people in the same industry, saying ‘Don't do this.’ What would that be?
Alex Leduc: In the past two years? I mean, I know we don't have enough time to go through all of these mistakes. But a lot has definitely been made. So, for example, this is my first startup. I haven't done this before. So for me, there's like a level of perfectionism that you're used to within a corporate environment before anything goes to market.
I remember early on, I'd want to go through a ton of user interviews, a ton of QA, all these things before anything ever saw the light of day. Obviously you need to vet all the core things that are mandatory before anything goes to the public.
But it's honestly so much better to just run experiments, and get things out faster to learn faster. A lot of the things that we've invested tons of time into building ended up being features that no one cares about, or things that no one's gonna actually buy into, or like a useless, customer journey.
That learning cycle is definitely one thing that I've learned a lot about in the last year that now, I think we have it down to a science.
The second thing is, we bootstrapped as far as we could. We recently raised capital, but I think one of the things is initially, you're really gritty about how you spend that money. So you want to try to do everything yourself. I remember I literally learned how to code, and took growth and marketing classes, took HubSpot courses, and Google Analytics, and at some point I even started doing front end development. But I hit a breaking point where I'm like, there's a limit to how many things you’re able to do and especially, how competently you can do things.
So I think at some point when you're starting a company, there's only so much you can really bootstrap. You have to identify what are the core weaknesses you have and find somebody to do them early, or else you slow yourself down. All your other strengths aren’t being spent where they need to be spent.
And then, once you get comfortable around that, I'd say, that was probably like the first six to eight months of me starting this business. I was kind of in that mentality, where it was me and one other part-time person. But now, bringing in the right people makes a huge difference and then also, you get a lot more out of what it is you're doing. Because ultimately, I don't think anybody sets out to build a company to own 100% of their company and be like, let’s build this empire that they own 100% of. It's more like you really want to solve a problem, and that's really the main thing that drives you.
So bringing in the right investors and people and sharing a bit of the gains as it goes, enables you to get a lot more done faster. And that also genuinely increases the satisfaction you have with running a business.
Darrell Keezer: That's awesome. And I think it's a lesson for any entrepreneur, like ‘We can go cheap, but don't go too cheap.’ Find the areas that you can get away with stuff, but not everything. As a marketing company, sometimes I see startups and I'm like, ‘Wow, did you design your logo?’ Like, yes, I did. You're like, ‘I know.’
Everything that I've seen of Perch online has been high quality, and it seems like you guys know what you're doing. Even when we make mistakes along the way, you guys have been very, very quick or it sounds like you've been very quick to say you need to change, we need to change.
Alex, I really appreciate the interview time today. I think for myself, I personally learned a lot, bringing in senior people early. I think of Jim Collins’ concept of return on luck, where sometimes we all get lucky, but are we actually acting on that luck?
It seems like you guys have really pushed hard to do well during a time that homeownership is a struggle. It's now a major political issue for Canadians, and you've combined the right people, the right technology. And it looks like you're building the right processes to really expand.
So congrats on your success. I’m really excited to see Perch grow over the next couple of years and I really appreciate the learnings you gave us today.
Alex Leduc: Absolutely, thank you so much for having me. It was awesome to talk about what we're doing and also if any of this helps the next entrepreneur get to where they’re going, then all the better.
Note: This transcript was generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio before quoting in print.