Interview: Alex Leduc
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
Perch is a Toronto-based digital real estate platform founded by Alex Leduc in 2018 which seeks to help Canadians get affordable mortgages and make better real estate decisions. Alex graduated from Ivey Business School at Western University in 2013 and worked in the Canadian real estate industry for five years before founding Perch.
Before founding Perch, you originally worked as an analyst and a manager at Equitable Bank and the McCann Mortgage Corporation. What motivated you to leave those larger, more established companies to start your own firm? How did you approach that risk-reward trade off?
Prior to starting Perch, I spent about seven years working at different firms. The one thing that became really apparent to me while working there is that there aren’t any good systems for the way people make their decisions in real estate — there’s a ton of disconnect. The realtors do the realtor part, the lawyers do theirs, then it’s on to the next person’s job. I noticed that since everybody is only interested in their own part of that process, people don’t get the best advice because it’s hard to actually know who is a good mortgage broker versus who is a good realtor. After doing enough research, it became apparent that there really isn’t a better way for people to make such a huge purchase.
What I found is that I knew a lot of the fin, but I didn’t really know any of the tech. I knew a lot of quantitative and finance people but I didn’t know a single developer. I also tried to find a co-founder but didn’t, so I knew I had to pick up at least one other skill. So I picked up coding and taught myself SQL and Power BI, which was enough of a skill set for me to do an NVP. I would literally go to food courts with a working product and then sit down with random strangers to get honest feedback — if you ask your friends and your mom, they’re going to tell you it’s the best thing they’ve ever seen.
Then I put in some capital, hired an offshore developer, and got a working product. Once it was apparent that there’s a lot of potential, that’s when I really made the switch. It’s hard to build a business and be full time because you’ll be in your full time job and thinking about what you’d want to do in your business. I quit there, started my company, and then went full time into it.
That makes a lot of sense. It’s interesting to hear that from a student’s perspective — we might not consider those things at our age, but definitely could further on in life. So for some of our readers who might not be familiar with Perch or PropTech in general, can you describe what the company does and how you knew that PropTech and FinTech was the space you wanted to move into?
Funnily enough, PropTech wasn’t well-known when I started. Now it’s all the rage and everybody is talking about it, but the reality is that PropTech always had so much potential because the real estate industry, especially in Canada, is just so massive. With Perch, we solve two problems.
First, we help people get into their first home — we essentially tackle housing affordability. We help optimize our customer’s path to home ownership by figuring out the fastest way to get there based on their specific parameters. We’re able to do that better than other providers because we have access to over 25 lenders and also an auto adjudication algorithm that fast tracks.
But this is where the journey stops for most people. Once someone is a homeowner, the second component is putting that home equity to work, and we help people build wealth once they become a homeowner as well. So we’re solving those two problems: how do we get our customers into housing and how can we help them build wealth as homeowners.
Very interesting. We actually don’t cover too many real estate or property market topics here at IBR, so it’s really unique to hear that kind of perspective. One of the things we learn about entrepreneurship at Ivey is that although the rewards can be really high, it’s also a very challenging journey. Applying and going through funding rounds and tech accelerators is not an easy process, so how did you find that and how were you able to work through the setbacks and the failures?
My story is a bit interesting because I just raised through friends and family earlier on. Our first formal fundraising round was actually a month ago when we closed our seed round. We raised $1 million then, but didn’t have any prior round. Typically there are two other stages you’d go through, an angel round and a VC round, but we just bootstrapped straight past that. I was lucky to be in a position where I could do that, but like fundraising is definitely a kick in the teeth because it depends on so many things — how strong is your product? How strong is your network? Are you cold calling investors out of nowhere? Or do you have people that you already know that can do warm intros?
The reality is, most of those funds are going to look at a thousand or more companies in a year. It’s not necessarily that your idea is bad, it just might not be the one they’re looking for. That being said, there is a certain degree of luck and being at the right place and time. If you’re going to be a full time CEO whose only job is fundraising, then you’re not going to have time to build the business — you have to be able to manage expectations in both ways. Personally, it wasn’t something that I wanted to spend all my time with early on. To add on to that, not everyone’s going to get or like what you’re doing. I bet at some point when Uber was pitching their service, someone in the room said that people already take taxis.
That’s really great advice for any students here at Western or Ivey who might want to pursue entrepreneurship. Many who are interested in pursuing entrepreneurship face the challenge of needing prior work experience. So do you have any advice for those students who aren’t sure whether or not to pursue that ambition and to what degree?
I think there are two things about entrepreneurship that are misunderstood.
First of all, I view prior work experience as almost a given, because it’s near impossible to change a process if you don’t really understand. It’s also difficult to identify and fix a pain point that you don’t understand. While there are exceptions, most investors looking at a company are going to ask, why is this the right person to solve this problem? If you have zero experience on your resume, these investors might not think you’re that right person — it’s a tough sell to get capital. In terms of my background, I had seven years in the sector and understood the industry very well. I have a CFA among other things that make me arguably more qualified for the role. But if I came fresh out of school?
The second thing about entrepreneurship I think is misunderstood, is that people imagine entrepreneurship as being the person with all the ideas. In reality, that is the easiest part of being an entrepreneur — the execution is by far the hardest part. We need people that can take an idea, beat it up, and then ruthlessly execute it. Unfortunately if you can’t execute, it’ll be really tough to survive in a startup because you’re having to always do a minimum of two jobs. If you have no time management or ability to execute, you’re not going to do a lot in this role realistically.
What sort of strategies do you think that Perch’s growth can be attributed to, and when did you start to see traction take off?
We initially wanted to offer fully digital mortgages. Our idea was that no one wants to go to a bank to schedule an appointment, talk about everything, and then bring in paperwork among other things. When the pandemic hit, it accelerated this entire process because people didn’t get to choose whether or not to go online, they had no choice. By then we’d been building the platform for one and a half years versus everybody else trying to build from scratch once the pandemic hit. Not only did it make it easier for our customers because digital experiences became more of the norm, but it also became easier to form partnerships.
We had an ideal state of where we wanted Perch to be, but then we had to work backwards and accept that it’ll take time to get there. Pushes to digitalization around us moved people in the direction we wanted, and being able to ride that was key to experiencing a lot of growth. We doubled our revenues year over year because we were able to really adapt to the market when it was changing.
You spoke a bit about COVID-19 already, but how did you maintain the values and culture of Perch a) as you became a bigger organization but also b) while working remotely — was that tricky?
Perch was always a fully remote company. I was on the fence for a while about getting an office, but then the pandemic definitely solidified that we’d probably never get one. If anything, being remote wasn’t a COVID-19 issue because we were already remote before then.
What was interesting was ending last year with five people and now being at 15. I actually think having more people is better for culture because there’s more likelihood of interacting with other people. There are a ton of steps to take to build towards having a strong culture, even in a digital setting: you can have online meetups, virtual lunches, or even games as an example. Obviously fatigue is something to consider as well in regards to online meetings, but if you host something fun, people will have fun. At Perch, we had an UNO competition for Uber Eats gift cards — we didn’t get Zoom fatigue because we were having fun.
A lot of Ivey students are graduating and starting to look for places, and they’re definitely seeing some of the same issues that you were talking about. What solutions to these housing supply issues do you believe would be most impactful? Would it be on the part of the policymakers or private developers?
It’s a bit of both. Developers are limited based on how much they can develop, so if it’s hard for them to build new homes or there’s limited land as an example, all of those factors are preventing developers from doing more. A 500 unit condo could theoretically be built in one place, but developers might be limited to only three stories. The regulatory environment and planning will directly impact how much development is happening, but there’s also that element of free market that’s at play.
Over the last couple of years, there’s been a greater emphasis placed on remote work. The beauty of remote work is that location and vocation no longer matter — we’ve helped people move from Toronto to Nova Scotia, where they bought the exact same house for half the price, and they’re still making the same salary. Then I just look at other countries that are rich and developed. Transportation enables more access, so high speed rail and more advanced transit technology means more access.
I think this greater emphasis on remote work is going to help correct the problem to a certain degree because it reduces the demand in pockets. That’s really the problem: there are so many high demand areas where no one wants to sell their house.
You mentioned the increasing number of immigrants. Has that changed anything about your product offering or anything about your customer acquisition and retention strategies as it pertains to new immigrants specifically?
From a customer acquisition and retention strategy standpoint, the increasing number of new immigrants definitely plays a role. A lot of people might have defined ways of approaching home ownership — they might refuse to get a mortgage from someone outside of the big 5 banks, even if the rates are lower or if it’s an equivalent product. On the other hand, new immigrants likely don’t have these preferences, and a lot of people might not even know who these providers are.
It’s interesting because other countries outside Canada are a lot more digitized in the way they do real estate. A lot of people new to Canada are actually great users because they’re used to digital mortgages already. Besides, our value prop is that we help guide people towards home ownership. We help immigrants plan ahead and with things they might be unfamiliar with, like navigating Equifax credit scores or even bringing money over from abroad. They see a lot of value in that because it’s something they need, versus someone who might be on the fence about buying a home.
It makes for a really good client. An added bonus is that they can do it from home before even arriving in Canada — instead of booking an appointment at a bank, they can get their Perch profile and do it right away.
What sort of areas and trends in proptech or fintech are you excited for, and how do they impact Perch going forward?
There’s a ton of trends. There are a lot of rent-to-own programs for people who don’t have established credit. I think we’re going to see a lot more rent-to-own, but also more fractional models of ownership instead of the standard, one person or two person deal. These are already around to a certain degree — shared equity home programs where people own chunks of a property by contributing different parts. We’ll probably see a lot more of that because real estate is such a hot asset class, especially Canadian real estate. Investors want in, but most don’t want to deal with the hassle of being a landlord.
As open banking really starts to take off, I think we’re going to start seeing a lot more competition in regards to product offerings. Right now, most banks or lenders have very standard and similar products. Once there’s more data out there to help people build the algorithms the lenders need to quantify risk, we’ll start seeing a lot more innovation in regards to products that enable people to get a home even sooner.
That actually leads right into our next question — if some of these trends are visible, how do you see big institutional entities reacting and what are they doing in the space?
A lot of big institutions might simply buy up their competitors. There will likely be a tremendous amount of money being poured into acquisitions. As far as how are the incumbents going to react? I think the main disadvantage of large institutions is that they can’t pump out products as fast as we do. Because of that, they will probably try and buy their competitors, but also try to outmaneuver them because they have substantial amounts of capital. It’s not a bad thing though, sometimes there are really good partnerships that can get formed between the incumbents and the newcomers. Right now, I think marketshare is pretty concentrated. Once big institutional entities get involved, those will be the main things that we’ll see in the foreseeable future.
So pivoting back now to some more personal questions just to wrap up. If you could go back in time and give yourself some advice as a university student or specifically an HBA student, what would you tell yourself?
Don’t spend that much at the Frog! No, no, I would tell myself to focus more on building networks outside of my immediate career. Don’t just meet a bunch of people that do exactly what you do, especially if you aren’t 100 percent sure what path to take. Be open to plugging yourself into different ecosystems — I honestly found it fascinating to do coffee days where I just went to sit down and be like the engineers with their headphones on, just typing away frantically and not speaking to anyone for an hour.
Regardless of what space you want to go into, be it UX, design, finance, or human resources,there are tons of activities to be exposed to. Just keep asking yourself, what skill set am I developing? At university, there’s this mindset of commitment — like I want to do finance, or accounting. There’s this immense pressure people feel that if they don’t pursue a path, they will fail because nobody likes a generalist.
I think it’s about focusing not so much on being the best at one thing, but to always have a second activity to enjoy. Having that will allow you to think about things from a different perspective, which is really valuable.
Awesome, really appreciate your thoughts. I just have one last question for you: when starting Perch, you were setting out to succeed and make a great company in spite of the risks. What does success mean to you in the long run?
That’s the billion dollar question right? My ultimate definition of success is being able to fully enable people to achieve home ownership and then build wealth afterwards. If we’re able to effect change by creating new products, like enabling people who otherwise wouldn’t be in the space to buy a house, and developing a system where people are making the right decisions with the right experts, that’s our goal.
We want people to get the right advice, pick the right people, and do it from start to finish. For me, success means nailing that concept and helping people do exactly that — it’s more about the destination versus any quantifiable metrics in the long term anyways. From a qualitative, long term standpoint, that’s really my ultimate vision is to build that ecosystem.
