Justin Herlick - Pine

In this episode, we delve into Justin's journey as a founder and how he met his co-founder. We also talk about Pine's growth and the fintech industry in Canada. 

Justin emphasizes the significance of having insights into the industry in which you are building a business. Such insights can help in navigating the challenges that arise along the way.

Transcript

ibrahim: 0:28

Hello, everyone. Welcome to FinHub, a Canadian FinTech podcast, where we do a deep dive with the founders of Canada's leading FinTechs. I'm your host, Ibrahim, and today we have the pleasure of talking to Justin Ehrlich. Justin is the CEO and co founder of Pine. Pine is a digital direct to consumer mortgage lending company in Canada. They provide some of the lowest rates in the industry. In this episode, we talk about Justin's journey, Pine, The free tech industry and much more. I Justin, thank you for coming to our show. So let's talk about your journey. What inspired you to start pine?

Justin: 1:11

Yeah, thank you for having me. So if I could just take a few minutes, I'm more than happy to walk you through my story. so I originally grew up here in Toronto. And, when I went to university, I went to Queens University in Kingston, and I studied finance. So kind of early on, I got involved in the finance industry. And I ended up working in the finance industry for a little bit. but when I went full time onto my career, I actually went into technology industry. So I was really passionate about going into technology instead, due to not really vibing personally with a certain aspects of the finance industry. So when I graduated, I moved to California to start my career as a software engineer. And I was really fortunate that I had the opportunity to. Go to a number of different kind of really exciting startups in the San Francisco Bay Area. And one of the startups I ended up working at in, like a product management product partnerships type of role was a company called Blend. And Blend is the leading provider of, what's called mortgage point of sale software. And what that means is they work with companies like Wells Fargo, U. S. Bank to have an online mortgage experience. So if you go and you apply for a mortgage in the U. S., You're taken into an online platform and that platform was built by blend And while I was at blend we got to see a lot of growth which was really really exciting When I was there, you know, I started off they had maybe like five or six customers and by the time they went public they had about one third of the entire US mortgage industry and There was a lot of digitization a lot of rapid innovation happening in the mortgage industry all at once, which is really cool One of the things that I got to be responsible for at blend was taking that product offering and bringing it to the Canadian market. So I said, hey, how can we, take this amazing platform that's being used all over the U. S. and bring it into the, the Canadian market. so I was kind of in charge of that for a bit. And what we did see was some adoption and we got some, Canadian mortgage companies to use us. But we, we saw that the banks and typically the biggest players were still, not as, not as ahead as they were in the U. S. And we had a really hard time changing their mind and convincing them that, you know, the big banks in Canada should digitize their mortgage process. So, we kind of put a pause on that at Blend, but I had to reflect on this situation personally. And to me, there was a huge problem that needed to be solved. And the problem was that Canadians were still not getting their best experience out of, their mortgage process from the Canadian lenders. And to me, I said, hey, you know, I tried to solve this one way. I tried to give the best tools available. But they weren't really being adopted. What if I just created a my own company and I just decided you know What if I could work directly with Canadians and really just give them the best process and give them the best experience that I? You know I could I could pick up so I'm after five years of living in California I returned to Canada and I started pine with my co founder Jonathan And since then, we've really worked towards our mission of supporting Canadians throughout their entire journey in home ownership. So today we offer mortgage, but our goal and our vision is to support Canadians throughout their entire journey in their home ownership.

ibrahim: 4:14

Thank you very much, Justin. How did you and your co founder meet? What led you to believe that you'll make a great team?

Justin: 4:22

Yeah, so, me and my co founder, Jonathan, met at a company called Instabase. We were working together. Jonathan was one of the engineering leaders on the team, and I was one of the product... leaders on the team. So we had worked together actually for two years before starting Pine in California, and we really got along. So we complemented each other's skills really well. a funny story I like to tell is during the COVID pandemic when everyone was working remotely, Jonathan moved to New Zealand temporarily. And in New Zealand, he was still working and maintaining Pacific hours. And so he would wake up at like 2 a. m. in the morning and start his day and just continue throughout and I was like, wow, this guy, he, yeah, this guy grinds and he, he works really hard and he's very reliable and he did this for like, I want to say like eight months. so I was, I was convinced that Jonathan would be the best person to work with. So when the idea to start this opportunity came up, you know, it was kind of out of left field for Jonathan, because this is a Canadian company. He had never been to Toronto. He'd been to Canada a few times, but he had never been to Toronto. And I said, Hey, do you want to start business with me in Canada? and it's going to be a direct consumer business as well. And, you know, we had worked together and he believed in me, so I'm really proud, I'm really glad for that. He moved to Canada a few years ago now, and, we started a company together. But we had known each other and we had worked, together well for, for two years.

ibrahim: 5:40

That's impressive. Can you describe the first few months of pine? What were the biggest challenges and are we able to overcome them?

Justin: 5:49

the biggest challenges of Pine is whenever you're starting something new, specifically in financial services, you're fighting a lot of inertia, you're fighting a lot of, complacency. So, you know, our biggest challenge is how do we convince, Canadians that there is an alternative to their existing financial services providers? Because most Canadians, they, they go to their bank. for their mortgage, or they go to the broker so that they can get a mortgage from the bank. and we have to change that inertia. We have to say, hey, how can we, Break the common pattern and really provide people with an alternative option and that that's that's pretty difficult. I would say

ibrahim: 6:23

Thank you. Thank you for that. as a founder, what has been the most rewarding part of building pine for you

Justin: 6:30

yeah, the most rewarding parts. That's a great question The most rewarding parts has been seeing our product actually help help people right save them money get them a mortgage Faster easier and getting the positive reviews back from our customers. That's the most rewarding part I want to be able to support everyone And their goals and hopefully save the money and make their life a little bit easier because the home buying process or the home mortgage renewal process is already as stressful as it could possibly be. There's no need to make it even worse. So we're trying to help people in one of the most stressful moments of their life.

ibrahim: 7:05

Yeah, talk about impact, right? And at any point in time through this journey, were there moments you felt like giving up? I've heard founders talk about how they were running out of cash, that the business model needed a change, and they had to pivot. Did this ever occur to you?

Justin: 7:26

not really for me. I've never, this is something I'm not going to give up on. I've been really passionate about this. so when I came into this opportunity, I had a very clear vision for how I wanted to get the company to where we are today. And, I knew that if we could hit all of our interim milestones, that we would be in a really good spot. and fortunately, lots of, we've had ups and downs for sure, as has everyone. But we've been on this, path, to where we wanted to be. And fortunately, we've been able to... hit that milestone. so no moment of almost giving up yet. but you know, there has been times I've been really tough, like raising money in this type of environment is not the easiest. there are lots of challenges in doing what we need to do. So there's been many times where we've considered Oh, do we have to change the strategy? Do we have to pursue a different approach? I mean, we work through those problems, but giving up is not really an option for us.

ibrahim: 8:19

That's solid. Thank you. So, what advice would you give to other entrepreneurs looking to start a FinTech company in Canada? Busy. The experience

Justin: 8:29

Understand that there are a lot of things that you'll have to work through, especially if you want to start a fintech company. There's a lot of regulations you have to understand. Hopefully you're coming into that market with like a key insight. because a lot of people I think they just they see an opportunity to say, okay, this part of the the This part of the economy needs improving, but they don't have a key insight. Like how am I actually going to, make it better. Right. so I think of people who don't have that key insight can, can get in some difficulties and really getting over some of the, the first humps.

ibrahim: 8:59

Uh, yeah, I agree. it's best to have someone with industrial The founding team. I mean, I can only imagine how full the insights you goes from trying to expand Blaine into Canada, LTM, beauty, and pain. So talking about that, you try to bring blend into Canada. but, uh, adult show is very, very low. Between then and now what's changed. I have more legacy banks coming on board.

Justin: 9:25

So, I would say that since I started the company, there has not been a lot of change from the legacy players. the legacy, like the big banks, they're, they're kind of doing the same thing they've always done, which is really unfortunate in my opinion, because. you know, I was trying to give them a newer, innovative solution back in like 2018, 2019 type of time period. So to see it's 2023, almost 2024 now, and the things are, not the same, or like they're still the same and things haven't gotten any better is disappointing. But what I can say is there's been a lot more new entrants, which is really exciting. So if Pine is, Pine is one player, but there's a few other players in the market and I'm excited that there's other people trying to change things for the better. And I think we're all pushing the industry forward together. So new people are approaching, but there's also some new entrants that have not done so well. So again, you need to have that key insight. You need to know how you're going to set things up in the right way, to really move the industry forward.

ibrahim: 10:20

Thank you, Justin, talking about the industry, how do you see the fintechs role in involving the Canadian housing and mortgage sectors from your own perspective?

Justin: 10:29

Yeah. I mean, I, I think that the, FinTech ecosystem will continue to evolve through hopefully through competition. So I think you're going to start seeing, a lot of the innovation, particularly that happened in the United States, come to the Canadian market. So faster approvals, more integrations, a fully digital experience. These are kind of like the, the baseline. This is what you need, like the bare minimum, I think, to offer additional mortgage. And then when I think you're going to start to see the future. Is, newer technologies speeding up and making the process, more cost efficient. so AI technologies, I think nobody has really integrated that yet, but you're going to start to see it. I think you're going to start seeing a bundling of services as well, where people take one part and they say, Okay, we can offer you a mortgage, but if we offer you a mortgage with... This other service, then, then we can, you know, save you money, across the board as well. So I think there's a lot that's happening. There's a lot that changing, but for this to happen, there needs to be competition.

ibrahim: 11:25

that's good. And how does Pine, differentiate itself from other mortgage or fintech providers in Canada?

Justin: 11:32

I think what differentiates us is our focus on technology. So, there's been a few companies in the industry, but if you, if you look at our team and our backgrounds, it's really the, the focus on technology at the core of our company, which has separated us. I'm a, I come from a technology background. Jonathan comes from a technology background. A lot of the people that we have come from technology backgrounds. So we've been using that as kind of like the key pillar of our advancement. And because of that, you know, we've been able to attract venture capital because venture capital is one of us and technology and, and. Industry changing type of companies. So, since since starting the company, you know, we've raised close to 40 million in, in equity and venture debt, and we've been able to do that by our focus on technology.

ibrahim: 12:16

That's great. That's amazing. Thank you. So what technology innovation does spine utilized to? The experience. I will say the onboarding is seamless. If you could just tell us more

Justin: 12:31

yeah, so I mean, so if I if I rewind a little bit, on my experience when I was at blend, I learned a lot of user patterns and a lot of, kind of technology, features that that customers like to see. Because when I was at blend, we had a software platform. That, we had a software platform that was being used by many, many, many different mortgage lenders and kind of across the board, we realized what things worked well and what things didn't work well. So I'm glad that you saw the seamless customer experience that is what we want every customer to feel. but behind the scenes, there's a lot of work that took to make that happen. So we built our underwriting platform entirely in house. So all of our underwriting happens. in house by Pine. And, and what we do is that allows us to have a holistic kind of data capture of that customer. So we don't have your data come into our system and then go to another system and then go to another system. And you're always switching context. We have everything live in one platform. That's kind of like our key innovation that allows us to to approve and underwrite and fulfill customers needs faster. But to build that system took a lot of work. I'd say it took almost two years of work and we have to integrate into a lot of other companies as well. So it wasn't just us, you know, building And, building on our own, we have to work with the rest of the industry and we have to work with all the other participants to get everything working. Like Equifax, for example, on the credit side and, different industry partners to get all the integrations.

ibrahim: 13:48

That's interesting. Thank you for sharing that with us today. So, yeah, I know some players try to walk around using Equifax. For example in the United States of stars is a company that uses multiple data. employment location. Other data points. to the timing, the credit worthiness of borrowers. So I looking at and play something similar. to L boosts, your technology platform.

Justin: 14:14

So in the mortgage world, it really comes down to like a common set of rules that pretty much everyone's following. It's what's your total debt to serviceable income, what's your credit score and what's your gross debt to serviceable income. And then, you know, obviously you've got to look at the property as well. Is it marketable? Is, is the, is the value. What we, like, what is the appraised value, what we expect it to be, all these, all these things. So we don't use a lot of those extra factors, I would say, because we, we like to, we follow the common underwriting practices that the rest of the industry uses. and because of that, what we're really trying to do is speed to get customers faster. We're not trying to approve customers. we're not trying to get customers to, you know, qualify where they otherwise wouldn't qualify. That's not really our game. We're just trying to get those same customers qualified faster and to save them money.

ibrahim: 15:02

So speed. Thank you for that. And what are the regulatory challenges that I in this industry? For fintech players

Justin: 15:11

so it kind of depends where you're operating. The regulatory environment at a high level, is, is kind of two things. There's provincial regulation and federal regulation. And depending on how your business is set up, you need to follow both or, or, or either, and you just need to be aware of that. So I, I would say like, it's hard to comment specifically on regular regulations, but, Pines are a registered brokerage in, every province, in Ontario, except for Quebec, and I think, Manitoba is in progress. So, we understand the regulatory environment well, but I would actually say it's, it's very guideline approach. meaning that you need to understand the guidelines and you want to understand the intent behind the regulation. So like, what are the rules and why are they in place? And where are the protections for the consumer and how are you respecting those protections for the consumer? So that's kind of, you know, my approach to regulation.

ibrahim: 15:58

That's great. Thank you. What's next for pine in the coming years? Are there any expansions, new product launches or partnerships in the pipeline?

Justin: 16:07

Yeah, we actually have a number of these. some of them are still under wraps, but I can tell you there's a very exciting project, which will be announced shortly. with a major kind of Canadian, partner. And then we're also in the process of integrating another company. So there's some really exciting stuff happening. it's unfortunate. I wish I could talk about it, but if you get back to me in like a month, I'll be able to talk about it.

ibrahim: 16:29

All right. All right. We'll be looking forward to that. Sure. Sure. thank you very much for that. Secondly, back on that, what are the biggest challenges that you think pine faces going forward and how are you preparing for them?

Justin: 16:41

I think the biggest challenges we face are, you know, the same, similar ones to the ones that we, faced when we started the company, how do we convince? Everyone, every average Canadian, every person here who has needs associated to their home financing, that there is an alternative, right? So it's the same problem. The market has changed substantially. So, interest rates are significantly higher now. the housing market affordability is quite difficult. It's always been quite difficult in Canada, but it's very, very difficult now. And then the fundraising and equity ecosystem has changed as well. So, a lot of things have changed. It's just a different game and a different strategy we have to play to work with our investors, to work with our partners. But at the end of the day, the challenge that we face continues to be the same challenge, which is awareness. I don't have, you know, 500 million to buy a stadium. So if I can't buy a stadium to put my name on it, how can I make people aware that there's an alternative? So that's, that's, it's always awareness. And hopefully some of the things we have coming up will help with that awareness.

ibrahim: 17:44

Oh, that would be nice. I mean, we

Justin: 17:46

Yeah, it would be

ibrahim: 17:46

we could replicate Sophie in maybe Toronto or somewhere. Well, yeah.

Justin: 17:51

Yeah.

ibrahim: 17:53

And, yeah, with recent economic changes and global events, I was pioneering ensuring stability and trust for his customers. I know I spoke with some lenders in the past, but they are not in the mortgage industry and they said they had to make some adjustments in the algorithms and all that. So is Pine doing anything like that? I was Pine ensuring stability.

Justin: 18:12

So, we're a little bit bigger now. so we have some news articles that are, are like social pieces that really help us because when someone sees your name in an incredible newspaper, they believe, that you're real and you're not a scam and you're not trying to, you know, dupe people. so that helps. We try to get Google reviews and we try to get reviews in social proofing wherever we can as well. So that helps. But I think really it starts from the customer experience that you're giving them. If you're staff members and you're You're, you're, you're the employees that are actually on the front lines and they're talking to customers if they instill trust and they speak with a calm and, and, understanding voice, I think you're able to help get that. And then we do as a company, we do everything that we can to make the company look as legitimate and as established as possible as well. So it's, it's, you need to have the right staff and then you didn't know what to say, but you also need to help them and, and do everything that we can on the company side. So that's why we take a lot of time to make sure our branding looks crisp, to make sure our website is always up to date. all these things they add up because if things are becoming inconsistent in the customer experience, you're going to lose that customer's trust

ibrahim: 19:12

you very much. With the recent rate hikes, thank God for the recent post. have you, has there been any change in the way, I mean, maybe in customer perception on your own side? Like, for example, I used to see the same inflow of customers coming to Pine. Has there been continuous increase, month on month?

Justin: 19:32

yeah, so we like august was our best month ever and september is going to be very similar

ibrahim: 19:37

Oh!

Justin: 19:37

so we're yeah. Thank you. so so we're excited that we're continuing to see we actually see Almost like, like, like there's more demand in a sense, because with the rates being so high, the majority of our customers are customers who have an existing mortgage, and they're trying to renew their mortgage, if that's that's where the market is right now. So we are helping people save money when they renew their mortgage. at better terms and better rates. So we actually have seen the interest rates going up in some ways has helped us. but it's been, it's put a big damper on the, on the home purchase market. There's just less homes changing hands these days because people are, they're, they're locked in. So, despite that, we've seen month over month increases almost every single month. And this, we've done this without increasing our marketing budget. So things are getting better for us and we're really happy about this.

ibrahim: 20:24

That's splendid. Yeah, just wrap this up. Any final thoughts or messages you'd like to share with your audience or our audience today? All

Justin: 20:31

I guess like the main one is like, well, one, one thing I like to tell people is just the way, just because the way things have been done has always been the way they've been done does not mean that they have to be continued to be that way. So try to instill this in my employees. I try to instill this, in everyone I talk to. This is the old way of how it was here. All the opportunities that we can make it better. Let's not fall back on the old process just because the old process has been that and always look for the innovative solution for it. So that's kind of like the message that I always try to instill in everybody.

ibrahim: 20:59

Thank you very much for joining us today. We are very excited on the next stages of Paez groups.

Justin: 21:06

Thank you. Thank you for having me.

ibrahim: 21:09

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