It used to be the case that people pretty much ignored the news in August’s ‘silly season’. There was a tacit agreement that nothing serious would happen and we could all take a proper break.
In a mobile-first, always-on world, this is no longer true. Fewer business deals may still be struck in August but greater levels of attention are paid to those that take place.
The latest fundraising by Twenty7Tec client Habito has therefore received quite a lot of notice and raised a few eyebrows.
The Series C £35m fundraising brings Habito’s total funds raised to £63m. At first glance that is an extraordinary figure. Industry commentators have estimated that, ignoring running costs, it could take £18.5bn in mortgage completions to pay that funding back. For context, in 2019 the whole gross lending mortgage market was £265bn excluding product transfers, and it’s currently retracting.
Scale of ambition
But this is no silly-season fodder. Although the above figures are mathematically correct, that misses the point somewhat. Habito isn’t simply a digital mortgage broker. The scale of its ambition extends far beyond this, as we have already seen in its moves to become a lender in its own right.
At its best it’s also an exceptional marketing business (whether you like the adverts or not, there is no denying the scale and breadth of the brand recognition they have achieved). Here is where Habito really differentiates itself.
Former Spice Girl Victoria Beckham once said: “I want to be more famous than Persil Automatic.” What seemed a ridiculous quote at the time looks prescient now as ‘The Beckhams’ went on to set the tone for modern celebrity and amass a personal fortune of $900m to date.
Beckham’s quote is famous because it demonstrated the scale of her ambition. Persil may outsell the Beckhams, but she is unarguably more famous.
Habito’s vision – that the entire mortgage market and not simply mortgage broking can be revolutionised – is both grand and ambitious, like the former Spice Girl’s. It appears to be predicated on a simple belief: the customer experience of obtaining a mortgage remains poor; if you dramatically improve that experience, and do it with a relevant and prominent brand, you will create both competitive advantage and shareholder value.
In the US, Quicken Loans has had a similar vision. In the first half of 2020 it originated $124bn of mortgages and handled 9 per cent of the US mortgage market. According to the FT: “Heavy technology investment allowed Quicken to process loans faster, and provide customers with information about their application at every step. The technology investment has been paired with $3.7bn of marketing spending over the past five years, amounting to 17 per cent of revenues, an almost unheard-of amount for a financial services company.”
Quicken relentlessly took advantage after 2008 when other commercial banks fell by the wayside. It was faster to act and more committed to its course of action. It had a brand that customers wanted to deal with and had heard a lot about because of its relentless PR. It has taken a well-worn path towards an IPO – spending heavily to fund its growth.
It’s not for me to say if Habito will look to mirror Quicken’s approach. I have not seen its pitch deck. The point is that what is happening in tech now – and the contents of Habito’s pitch deck that has generated £63m-worth of interest to date – is not about a business’s performance today. It is about discerning where we are all going to be in the future, what the shape and size of the new market will be, and how that market will function.
Habito has clearly sold a vision of that future to its investors, just as Quicken has in the US. Perhaps, one day, they’ll both be more famous than Mrs Beckham. If nothing else, she’s living proof you can graduate from silly-season stories to tales of huge financial success.
James Tucker is chief executive of Twenty7Tec