The online mortgage advice startup has decided to veer away from the consumer facing model, instead choosing to provide its products to the market as a broker offering.
A number of staff from the mortgage advice side of Burrow have been made redundant, and the startup will retract from the consumer brokerage side over the next few weeks as remaining cases are taken to completion.
Founder Pradeep Raman said the decision was made because the cost of acquiring each customer outweighed the revenue they could generate.
Burrow, previously Dwell, was founded in 2016 by ex-venture capitalist Raman offering consumers an online mortgage advice, an eligibility calculator, a mortgage comparison platform, and an administrative dashboard for submitting documents and managing payments.
The firm was paid a fee by lenders for each mortgage sold.
However, because borrowers who are ready to transact are often already tied to brokers, Burrow had to target users in the very beginning of the mortgage process – meaning that it could take anywhere from six to nine months for a case to generate revenue.
In addition to the costs of paying for marketing services such as Google Adwords or targeted Facebook posts, the business model faced another problem of long sales cycles.
It took too much time to create revenue from each customer, and made it difficult to verify the success of marketing campaigns, Burrow said.
“When we went to market we offered these products directly to consumers, but the disadvantage of the model is that we have to pay to capture users at the very beginning of the journey, and that’s very expensive,” said Raman.
“It’s a very capital inefficient model to be going after,” he added.
The pivot
With the repositioning, Burrow will now offer its products directly to brokers, networks, and lenders.
“Every broker, network, and lender all have begun their digital transformation journeys over the last couple of years – so why can’t we work with them to provide the software suites that we’ve built?” said Raman.
“That’s the reason for the pivot – we’re trying a different business model that’ll hopefully monetise the assets we’ve got much better.”
Depending on the particular needs of the client, Burrow will offer one or a combination of digital user onboarding, customer relationship management tools, automated product recommendation, the form filling platform, eligibility and affordability calculators, and other tools currently in development.
Raman argued that the value of Burrow’s products has been proven by the 30,000 people who have used its mortgage calculation tools since launch, with 80% of users going through the whole calculation process and providing the necessary information online.
The tech will be licensed to clients, and will be customised to accommodate their needs and specifications.
“We’re having a very healthy number of deep conversations both with lenders and mortgage networks,” said Raman.
He declined to name the negotiating parties, but said that one of the networks Burrow is talking to is one of the largest in the UK.
Raman added: “Ultimately, this is a good thing – it’ll bring a lot more efficiency and transparency to the market both for brokers and clients, and it’ll drive down costs to the benefit of consumers.”
