Online mortgage advisor Burrow pivots to B2B, cites unit economics issue

Burrow, the U.K. startup founded by ex-VC Pradeep Raman and backed by Passion Capital, is shutting down its online mortgage brokerage service, TechCrunch has learned. The move is the result of a change in strategy as the nascent company pivots to a B2B model, offering software tools to lenders, mortgage networks and brokers.

According to sources, a small number of employees working in Burrow’s London office are also being let go. These are staff who operated the mortgage advisory side of the business.

Confirming the planned shuttering of Burrow’s B2C product and the startup’s change in direction, founder Raman provided the following statement:

We are now re-positioning as a B2B business working with lenders, mortgage networks and brokers to provide them with digital user on-boarding, automated product recommendation, CRM, content and other software and tools we have built.

He also stressed that retraction from the consumer-facing brokerage space will happen in a “very controlled manner” over the next several weeks. “We have a significant pipeline of customers whose cases we are fully handling through to completion,” he adds.

Specifically, five U.K, staff dedicated to the mortgage advice model have been made redundant. Furthermore, Burrow is looking to hire people into B2B sales roles and a senior full stack developer (I understand much of its engineering is currently outsourced).

Asked what was behind the startup’s change in business model, the Burrow founder says the move follows a strategic review of the business where it was decided that “the unit economics were not stacking up”. This, he says, is primarily based on the high cost of paid customer acquisition.

In addition, Raman says sales cycles are too long. “We can only capture people who are quite early in the purchase journey which could be 6 to 9 months before they are ready to transact. You cannot capture when they are ready to transact i.e. have a home offer accepted because by then it’s too late as they generally get tied into using the estate agent’s in-house mortgage brokers. This makes proving acquisition strategies hard as you have to wait many months to know what is working”.

In other words, it was potentially costing more to acquire new customers than the startup could ever make back, at least in the short term. To that end, Raman claims Burrow still has “plenty of capital” left in the business.

Founded in 2016, Burrow (formerly called Dwell) was on a mission to “make mortgages delightfully digital”. This consisted of a mortgage eligibility checker called Mortgage Report, which claimed to give you a “hyper-personalised” view of your mortgage options, and the Burrow Mortgage Score to indicate how much each lender would be willing to lend and the right mortgage type (e.g. fixed, variable, capital repayment, interest only mortgage).

In addition, Burrow offered mortgage advice, primarily through WhatsApp and web chat. Once you were ready to apply, the service provided a dashboard to submit the required documents and track your application. It got paid a commission by lenders for every mortgage sold.

And like much better funded competitors Trussle and Habito, the startup’s tech offered to monitor the market to ensure you remain on the most competitive rate and that you remortgage in time so as not to slip onto a more expensive standard variable rate.

Before founding Burrow, Raman was previously a venture capitalist, initially at Piton Capital and then at Forward Partners.