James Laird and Alyssa Furtado, co-founders of Ratehub Inc. are seen at the company’s Toronto offices on Jan. 11. With the addition of its CanWise Financial arm, the company is poised to take advantage of growing interest in fintech services among Canadians.Fred Lum/The Globe and Mail
Alyssa Furtado, co-founder of the financial-technology company Ratehub Inc., strode with confidence on to the set of the CBC's Dragons' Den in mid-2016. Ratehub's growth was surging. Ms. Furtado offered the Dragons a tenth of the company: "Today I'm asking for a million dollars."
Among the Dragons, there was, at first, a scoff and a smirk, but the group was soon sold on Ms. Furtado's pitch. One Dragon mentioned attracting Silicon Valley venture-capital cash. Two Dragons then proposed $1-million for 7 per cent of the company – valuing Ratehub at $14-million.
Stepping offstage, however, Ms. Furtado and her co-founders realized they were on to something bigger. Ratehub.ca features an array of financial information – mortgages, credit cards, savings and insurance – for comparison shopping. The company also sells mortgages through its CanWise Financial arm. Revenue was rising more than 100 per cent annually, approaching $10-million a year. Ratehub believed it could hit $100-million by the early 2020s.
Ratehub declined the Dragons' Den deal and instead moved to tap the venture market. Ratehub has now struck a series A financing deal for $12-million, a round led by upstart venture firm Elephant Partners LP in Boston, which had raised $156-million (U.S.) from investors in 2016.
"We realized," said Ms. Furtado of the Dragons' Den experience, "we had built an awesome business."
Toronto-based Ratehub had been founded in 2010 and spent most of its existence working with little outside financing. Government grants of more than $1-million (Canadian), designed to buoy technology innovation in Canada, helped. The new venture money will step up growth to a new level.
"Bootstrapping really allowed us to figure out what we were going to be best at and build the foundation of a profitable, healthy business," Ms. Furtado said. "When you're used to bootstrapping, [the new financing] allows you to be much more aggressive."
In the realm of financial technology – occupied by companies providing financial information, such as Ratehub – Canada is well behind other countries. The reason, people in the industry say, is Canadians are comfortable with, and trust, the traditional big banks – even if it means higher costs for a mortgage when they don't shop around.
An Ernst & Young survey in mid-2017 showed about one in five Canadians had recently used two or more financial-technology services, compared with one in three people globally.
It is here that Ratehub, and Elephant Partners, sees opportunity. Jeremiah Daly, co-founder of Elephant, had earlier in his career worked in London for Accel, the heavyweight Silicon Valley venture firm. In London, he saw the success of Moneysupermarket.com Group PLC, co-founded by Simon Nixon (who became a friend). Mr. Daly brought Mr. Nixon into the Ratehub financing to leverage his experience and expertise. Other countries, such as Australia, France and the United States, all have well-developed financial-technology companies such as MoneySuperMarket.
Ratehub can follow the road blazed by MoneySuperMarket, Mr. Daly said. Its market capitalization, publicly traded, is about $3.2-billion and its 2017 financials are on track for revenue of about $575-million and profit of roughly $135-million.
"There's no reason that the Canadian leader can't be of a similar size, maybe not quite as big," Mr. Daly said. "It could be [worth] north of $1-billion. The business model is pretty well established."
Elephant will also offer Ratehub brand savvy, a key challenge for Ratehub as it endeavours to become a more familiar name. Ratehub said five million Canadians used its services in 2017. Andy Hunt, Elephant's co-founder, is also a co-founder of Warby Parker, an American brand of glasses founded in 2010 and largely built online.
Ratehub did not disclose a new valuation or sales data. Ms. Furtado said the Elephant financing values Ratehub at a level "many times higher" than the $14-million deal on Dragons' Den would have. Ratehub did not reiterate its previously stated goal of $100-million in sales by 2021, but James Laird, a co-founder of Ratehub and president of its mortgage brokerage, said, "We're pacing in that direction, certainly."
Ms. Furtado, Mr. Laird and two other co-founders retain majority ownership of the company. Ratehub employs about 70 people, set to rise to 100 by the end of 2018.
Ratehub's business, roughly speaking, is split evenly between Ratehub.ca and CanWise Financial. On Ratehub.ca, there is advertising and the company gets fees from banks and the like when it connects a customer with a service, such as $100 for a credit card or $200 for a mortgage.
An enticing opportunity is to sell more of their own mortgages, bringing customers through Ratehub.ca to CanWise Financial.
The goal, on the technology front, is to eventually do it all online.
"Getting a mortgage in Canada today is a difficult process," Mr. Laird said. "The way it's done today is archaic."
Even though Canadians remain conservative when it comes to banking, Ratehub benefits from shifting demographics, said Roy Kao, a senior adviser of finance and commerce at Toronto's MaRS Discovery District. Millennials are more comfortable online and aren't as tied to the big banks. Ratehub noted that about half of their customers are millennials, with good incomes and strong credit.