We started out as a consumer financial services company doing buy now pay later for rent payments. That's just fancy words for -
Story starts out: it's me, 10 guys, and we max out our credit cards ($473k) to lend money out to broke college kids. I know, horrible idea.
We basically just enabled them to buy more booze and gamble with what should've been their rent money. They were the least prime population on the planet, but we did it anyways.
If you don't know where I'm going with this - we lost all the money and our credit scores went down to 413.
We ran a few other products like credit builders that added on-time Spotify payments and Amazon Prime payments (that were on debit cards) to people's credit scores. There were tons of international students coming into Canada, so we figured we could help them build their credit (and our own credit scores were at rock bottom, haha). We also brokered out tenant insurance policies which renters could purchase from us alongside the BNPL.
We built a bunch of stuff - like for underwriting, when our Plaid connection failed, we would have a screen scraper we built ourselves that would log into consumers' bank accounts. We found a way to fetch tuition wallet balances from students by doing this too. Clearly we did it too late though, haha, because we lost all the money we lended out. The bigger problem was none of it made an "insane" amount of money - a few grand at most - because we never had any volume. The products each made 15-20% at best.
We knew deep down we needed big marketing dollars to make any of it work. And as broke college students, we didn't have any of that.
We were running out of money fast, and the shiny big finance jobs were slowly killing off the team to a point where it was me and 3 other dudes left.
I was in there with them. I had a job lined up for investment banking at Scotia.
But the last thing I wanted to do was sell my soul to corporate in my 20s. I wanted to build something. I had caught the bug already.
It didn't matter what I wanted. We needed money.
I went to a conference with a bunch of rich real estate people hoping to figure something out. I end up running into Kevin and the Toronto Real Estate Board team. At the time, I didn't know anything about real estate boards or MLS associations, but knew they made a lot of money. The average real estate board charged $700 for member dues to be part of the association, and these guys had 120k members bringing in over $70M a year. So I was like - these guys definitely have rich problems, and rich problems have rich solutions.
I start asking him what his biggest problem was today and he says revenue. And I'm shocked. I'm like, why's revenue a big problem today? And he's like, every year our members push back on our fees. They started off at $700, but they tried to bump it up and the members said no - and pushed it down $50 every year or so. The problem was they had already over-hired and had the overhead of a $70M a year company, and now were figuring out how to capture revenue.
So I ask Kevin, how else are you guys generating revenue today? And he says referrals. And I'm like, referrals? How much of revenue today is coming in from referrals? He's like, 1/4th. And I'm blown away by that, because in no other industry is 25% of your revenue coming in from referrals. And I'm like, haha okay, what are you guys referring people out to? He's like, it's tools that our members need - like FINTRAC compliant identity verification, tenant screening products, mortgage pre-qualification products, etc. Very basic fintech products to me, since we had built out some basic underwriting engine ourselves for BNPL.
And I'm like, okay, what's the problem with that? And he's like, well, we form these relationships with companies and they give us a 10-15% kickback on the initial product we sell - call it Product A - but they have all our customers after we refer them over. And then they launch Product B, C, and D and keep capturing more revenue, and we end up not capturing further revenue - only slivers of recurring revenue.
And I'm like, have you guys tried to build this stuff internally? And he takes me to his office. I see what is an absolute tower of paper drawings - login pages, order report pages, applicant-facing frames. And I realize this guy's so technically illiterate he can't use Figma, but has insane amounts of product knowledge. Knows exactly what he wants, far more than any product manager at Snapchat would.