Modernising tenant referencing and improving credit scores

January 27, 2023

In this episode, Legislate meets Christopher Hutchinson CEO of Canopy, a platform designed to make renting work better for everyone. 

Christopher gives advice on learning from incumbents, the importance of a positive attitude as well as shining light on how Canopy helps improve the average credit scores of renters by 100 points within 3 months meanwhile reducing tenant referencing to a matter of minutes.

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Charles Brecque: Welcome to the Legislate Podcast, a place to learn about the latest insights and trends in property, technology, business-building and contract-drafting. Today I'm excited to welcome Chris Hutchinson on the show. Chris is the CEO at Canopy, a platform designed to improve financial health of renters and allow agents and landlords to pre-screen tenants. Chris, can you please introduce yourself and Canopy?


Chris Hutchinson: Yes, look, thank you so much for having me on and for that intro, because Canopy is an ecosystem for renters, which aims to, as you've alluded to, remove some of the pain points that are associated with renting, and also to enable renters to build their financial health while they're renting a property. It's actually a really tricky time to be a renter with housing shortages, increasing rents, cost of living crisis, and as ever the huge mortgage deposits that are required impacting rental affordability and ultimately people's chances of actually reaching their life goals. So, we've created 2 core propositions to address this. The first is the rent passport, so that is essentially fixing the outdated tenant referencing industry by using technology and data to essentially do what used to take days. We can do that in just minutes, and it helps to get the right people into the right property.


Then secondly, Canopy Grow. Canopy Grow is a proposition which is a financial and credit health builder for renters that helps them to get to where they want to go, whether that's a mortgage event in the future, whether that's just having a little bit of extra money in their pocket, or whether that's being at the top of the pile next time they move and showing themselves as a better renter. Having a better credit score is aided by having one of those things in place.


Charles Brecque: Being a renter is always difficult, and especially in London. I just moved to London and it was shortage of flats, shortage of housing, and a real fight to get properties, and then the referencing process is also quite nervous, and I imagine your product helps make the process smoother, not just for the landlords and letting agents, but also tenants.


Chris Hutchinson: Yes, it's a tough time to be a renter at the moment or a tenant, because there are in many places 20 to 25 people going for every property. There's a lack of supply and huge obviously over-demand, and so as a renter you want to be able to put yourself ahead of the crowd or put your best foot forward and show people the best parts of you when you're looking for a property. As a landlord or a letting agent it's equally tough. It's not as easy for either side of the industry. Those guys want to get people who they know can pay into their properties, and finding those people is actually quite difficult, finding people who are resilient enough to weather storms. So, I think what we try and do is obviously help both sides. Although we have the renter at our heart we definitely want to make sure that we can find win-wins for both sides of the market.


Charles Brecque: Since being at Canopy, what's been your favourite moment so far?


Chris Hutchinson: It's funny, the best moments are when you hear the stories of the renters that you've been able to help. Our credit-building subscription improves the average credit score by around over 100 points within 3 months, and that's a pretty significant really material change that it can make. We often hear about renters who are now able to either access a mortgage, or even on a more simple level they now have a credit score, so this has enabled them to actually have a credit score, and so the financial services industry is now actually open to them where it wasn't before. One of the things that we always look at on the key stats is that there are over 5 million people in the UK who are invisible to the financial services industry. What that actually means is that they have a thin or non-existent credit score, and typically that's your rental community. Those people are either on the margins or they're low earners or they're new to the market, they're students, for example, and so even the ability just to establish and get a credit score is a really important first step. You can't even go out and get a mobile phone contract without having a credit score, so it's actually something that people don't know about, but is actually critically important on somebody's journey.


Charles Brecque: I guess from that perspective, if you're paying rent why shouldn't it help your credit score, at the end of the day?


Chris Hutchinson: Yes, totally.


Charles Brecque: What do you wish you'd known before joining Canopy?


Chris Hutchinson: As I've listened to a few of these, everybody says there are lots and lots of things that they would have wanted to learn along the way. I think 2 things definitely stand out for me and for us. I think firstly not trying to do everything ourselves from the outset, or believe that we know how to fix every problem that exists. When we look at renters there are lots of different problems they face, and I think if we would have taken the time a little bit earlier to actually learn from some of the incumbents, really dig into some of the existing ways of doing things, I think we'd have been surprised and we are surprised at some of the successes that they've had and they've been able to achieve over a number of years. Now, we obviously then take those activities, build on them with innovation and technology, and ultimately end up doing things better, but I think thinking that we knew the solution before we'd even really looked into the industry, that was a key learning for us. Probably a lot of time spent where there was low-hanging fruit that we could have taken other learnings from elsewhere that we thought we didn't need to, because we thought we were coming with a new innovation and a new idea. So, I think that's one area.


Then secondly, and I'm sure lots of people say this, but hiring the right people is absolutely of the utmost importance. When you're a start-up you don't necessarily have the pick of the crop. You're not a huge business like Google or Facebook who can attract incredibly good, high calibre talent. You need to find a way of attracting the right talent and the right people with the right experience, and then obviously retain them. So, I think for us it's people who are resilient, and ultimately have a positive can-do mental attitude. They sound fairly simple things, but they're super-important. There are a lot of tough times in a small business, as well as some truly amazing wins, and having the right team with the right mind-set and characteristics is critical to being able to weather the storm, push through, but also celebrate the wins and acknowledge them when they happen and allow yourself to enjoy the success as well when it does happen.


Charles Brecque: I agree, and especially property that wasn't our initial focus, we had some early success and felt, 'The whole property industry must be like this because they're so antiquated,' but actually I think tradition is almost sometimes the USP in property, why it is so hard to get that technology to be adopted by landlords and letting agents.


Chris Hutchinson: It is, yes, there's definitely a reticence within the industry to adopt and accept change in some instances, unless you can obviously prove out the core benefit of it very tangibly to them, but yes, also it's a well-established industry. So, there are certain activities that occur within the industry which are done really well, and I think sometimes we think that as new entrants we can do things better, and we possibly can, but I think firstly we need to understand more about what they are.


Charles Brecque: What's the vision for Canopy for the next 5 years?


Chris Hutchinson: So, we've established ourselves fairly well within the UK market at the moment. We've grown about 10% every month for the past 15 to 16 months in a row, and we're at around about 4.5% market-share of all UK references are going through the business at the moment. So, next for us is definitely global, sort of, expansion, so one of my previous experiences was in launching corporate business into multiple new markets around the world, and we'll be doing the same with Canopy from later this year. There are nuances within each market, but renters represent a huge proportion of populations in most markets around the world, and our 2 core solutions do have pretty strong application in most markets, with a few tweaks. So, the first market we're going into will be Germany, probably by the mid-point of this year. What we're doing is we're working with our technology and our IP to launch into those markets, and in each new market we'll be looking for a large-scale distribution partner. We have one for Germany already where we're proving the model works, and then hoping to expand over the next few years across other territories.


Charles Brecque: I wish we could be in a similar position.


Chris Hutchinson: You will, no doubt. No doubt you will.


Charles Brecque: As a CEO I imagine you come across quite a few contracts. What are they, and what can you share about them?


Chris Hutchinson: Yes, when I joined Canopy I was the CFO, and also headed up one of our partnerships for a couple of years before becoming CEO, so yes, contracts are something that I've dealt a lot with, both in this role and previous roles. I guess our business is an ecosystem, and what that really means is that we do a lot of joining the dots between different parties, whether that's distribution, so we work with the housing market such as letting agents and institutional landlords and PropTech businesses to distribute our products. We also offer services from other companies through our platform to renters, to property market companies as well. The ecosystem is built on the back of partnerships, and so we have multiple partnership agreements covering the way we work within those partnerships, and also protecting obviously the relevant party's IP within every single case. So, partnership agreements of the contract we definitely see the most of, but also the ones which are the most important to get right for us.


Charles Brecque: You mentioned protecting IP is really important. What are some of the key issues that might happen if you don't protect IP, or how do you protect your IP in your contracts?


Chris Hutchinson: Yes, I think it's actually relatively straightforward in a sense of we know where the IP clearly exists. When we partner with a company for a service offering, for example, the reason we're partnering with that business is because we know they have a strong proposition to offer to either the renter base or to our housing market base. So, the IP very squarely and clearly sits with them, and we're a distribution partner. Equally, when we distribute our propositions through partnership, again, the IP clearly sits with us and the other party acts as a distributor. So, it's actually fairly well-established. I think the issues we face are less around probably the wording and some of the inherent details of the contract. I think the biggest challenge that we face when it comes to contracts is time. We're a small company, we need to and want to act fast, and what we often find is when we're talking contracts the initial conversations with a partner can be super-fast. Within a couple of days or a couple of meetings we can agree general terms and a desire to work together, but then ironing out the contract details can take weeks, sometimes months, and going back and forwards takes a long time.


So, I think the biggest issue and where we want to overcome things the most is in tools where we can comment and co-edit contracts in real time so that you remove that email chain that takes weeks or months. There's a reality that some parties are quicker than others. There are small start-up businesses who can act quickly and there are large corporates who have big internal processes that inherently take longer. I think being able to comment and work on a co-owned, co-controlled document is very much a first step.


Charles Brecque: In my previous role I worked quite a bit with corporate legal teams, and it was frustrating how long it would take the back and forths to even happen. Ultimately the tipping point for me and why I started Legislate is because we were losing contract post-legal negotiation because the buyer would get promoted or lose budget or lose interest. I'd say we've taken a more radical approach by effectively saying that you shouldn't need to negotiate the wording of the clauses, you should just stick to the heads of terms, and obviously that doesn't necessarily apply to all contracts, but at least today we focus on where there's minimal negotiation and parameters can be used to define the contracts as we mature and scale them.


Chris Hutchinson: I think actually for us it feels like that is probably the right approach, even for partnership agreements. I think the reality of a lot of contracts that we see are that they are inherently, as you say, standardised in some respects. There are then the heads of terms or an appendices of sorts, which goes in and fits into that standard document, where you have specific elements, whether that's exclusivity clauses, timings of contracts, durations, break clauses, minimums, etc, but I'm with you completely, I think all of those things can be handled in a simple schedule or a heads of terms, and actually the contract itself does remain fairly consistent across all instances, I think.


Charles Brecque: If you'd been sent a contract to sign today, what would impress you?


Chris Hutchinson: 2 things. (1) no hidden surprises. It's amazing how many people try to squeeze things into long contracts that you're not necessarily comfortable with at the eleventh hour. I think the main one is actually no long contract periods or no long durations to the contract, is what impresses me at the moment, I think. I'm a big, big believer in partnerships being for the benefit of both parties, and so both parties should be incentivised to make it work. I guess I'm specifically talking about partnership agreements here more than anything else, but both parties should definitely be incentivised and want the relationship to work. In my mind, if it doesn't work it doesn't work, and having a lengthy contract period where you're stuck in a partnership or relationship where there's not that win-win doesn't really enable you to enter in the relationship with a positive mind-set, and I don't think is really that helpful. So, actually I quite like it at the moment when people go in with relatively short contract durations, maybe a 12-month duration, and the genuine desire to make it work within that period of time, and if it does work then there's obviously a desire from both parties to establish a longer duration. That's what impresses me at the moment, shorter durations.


Charles Brecque: Shorter durations or mechanisms to break the contract.


Chris Hutchinson: Yes.


Charles Brecque: Thank you for taking the time, best of luck conquering Germany, and look forward to keeping in touch.


Chris Hutchinson: Thank you, Charles, appreciate it. Thank you.

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