SA Ibrahim: Hi Jonathan. It’s wonderful being here, and thank you so much for making the time to see us, and it’s always a pleasure to be in this amazingly successful company Ellie Mae that you now run.
Jonathan Corr: SA, it’s great to see you. Thank you for such the kind words. I’m looking forward to the conversation.
SA Ibrahim: Let’s start with the fact that here you are running one of the truly successful FinTech companies, and founded by somebody who came from the mortgage industry, and you bring a very unique background in the sense that you came from outside the mortgage industry, but you made the transition, and you understand the customers, and are providing them with great product and services. How did you do that?
Jonathan Corr: It’s true. The company was founded 20 years ago by Sig Anderman, and Limin Hu, in a Black Angus steakhouse. At least that’s what urban law says. There is a menu in his office. I think we have to do some carbon dating to prove it’s actually authentic. But with this vision, and I think that’s being key. It’s been this vision, this north star to automate everything automatable in the residential finance space from the consumer to the end investor. That vision, that north star has stayed constant, and yet when I joined about 16 years ago, and what pulled me in was the charisma, and the sales and marketing skills of Sig, he didn’t have that much technology experience, if you will. But I brought that to bear in my experience in Silicon Valley, and I just loved the opportunity. It was just such an incredible opportunity to come into an industry that is all about data. It’s all about getting the data from the consumer, figuring out what makes sense for the consumer based on their situation, and then taking that information and sending it off to dozens of parties to determine whether it’s true or not. Yet, the industry was barely embracing technology at that point, and we’ve stayed focused. We stayed true to that north star, we’ve adapted along the way, but we focused on customers. We focused on making them successful, and then having a bunch of team mates that were focused on their success, and we’ve been fortunate along the way as well.
SA Ibrahim: I used to have breakfast with Sig regularly at Rose’s Café in Pacific Heights, and there was a time when his biggest struggle was, “How do I find a success to lead the company?” And he went through a lot of people as you know, and then I started hearing these amazing things from him about Jonathan, and how Jonathan was fantastic. Then you became his successor. That must’ve been quite a transition. First off, how did you do it? What was your formula for success, and how did you feel in Sig’s shoes?
Jonathan Corr: They’re big shoes to fill, but Sig and I were always kind of a good combination team. Even when I first joined, I was the product, the strategy guy, the technology guy. He was the entrepreneurial visionary, and it was very much kind of like complimenting each other well like a ham and egg type of dynamic, and along the way as we shared the strategy, and I became chief strategy officer and was driving much of the things around product and technology, we really aligned. We shared similar vision, we shared similar values in terms of our passion about the customer, and our employees, and the community we’re in to give back, and it really became a natural thing over time. I learned so much from him over the years, and along the way he gave me more and more, and it was great to be able to have that baton passed on, but there was no disruption. When we were going out in the public market was asking … This is after I’ve been out. We’ve done the IPO roadshow in 2011, and became president and CEO about four years ago. The folks in the public market said, “What are you going to do different? Are you going to change the strategy? Are you going to do this? Are you going to don’t that?” I said, “Sig and I have been working hand in hand all this time. You guys know me from taking the company public in 2011. There’s nothing to change. We’ve got a great formula, we got a great organization, we’re operating on all cylinders, and so it’s just a natural transition, which is pretty amazing. And I give Sig a tremendous amount of credit in that as an entrepreneurial founder, being able to let it go a little bit, and I also feel great that I was able to establish that trust with him, and it’s really been an incredible success, and we’re very fortunate.
SA Ibrahim: Having bought companies from other entrepreneurs, and I know how difficult it is to let go, and one of the reasons I respect is because he’s one of the most top “philanthropreneurs”, and genuinely cares about people. And we’d love to interview him sometime, but more about Ellie Mae later. First, we’d like to share with our audience who Jonathan is. Tell us a little bit about your background, what family, and business, and learning background, educational background prior to coming to Ellie Mae.
Jonathan Corr: Sure. I’m a Boston guy, I grew up on the east coast about 20 minutes outside Boston, so I am one of those rabid Boston fans. Red Sox, Patriots. It’s actually interesting. I grew up, I was disappointed for many years as a Boston fan, and then I moved out to California after getting my engineering degree from Columbia, and lo and behold all of a sudden the Red Sox started to win the World Series, and the Patriots win Superbowl. I’m actually not allowed to move back now because-
SA Ibrahim: You’ll jinx it.
Jonathan Corr: I don’t want to jinx anything. I went to Columbia, engineering. I came out here. I actually came out with International Paper.
SA Ibrahim: Wow.
Jonathan Corr: I connected with some professors at Columbia, and International Paper said, “We want some young engineers to come in and introduce new technology, and ultimately go into managing some of our facilities.” I looked, and I saw the map of the country where all these locations, and most were in locations that I really was attracted to, I’m kind of a coastal guy, and there was a little location in Newark, California between San Jose and San Francisco. I came out and that’s what I did for the first five years of my career. But it taught me so much about leadership, change management, I had four unions working for me. Average age about 45 or 50, I was 22. You learn a lot along the way, you learn how to motivate people, how to deal with that. When I made the decision to go back to business school and jump truly into the technology space, that was a unique experience for a lot of the folks that were going into Stanford. I was fortunate I got into Stanford with the business school at Stanford, and then I was in the technology space really more horizontal for most of my career until I happened upon Sig and Ellie Mae. I had worked for Netscape, I was the product manager of the browser that lost unfortunately to Microsoft, but you learn a lot of lessons being on the other side of things going from a 70% share the other way. I did some work at Apple, I worked at a number of different technology companies through the dotcom boom, I even had a little bit of a experience at PeopleSoft. But I decided, “You know what? PeopleSoft is a little too big for me.” I wanted to get back to a venture backed opportunity, and I wanted to be in a situation where I could fundamentally change the marketplace, and lo and behold, Ellie Mae was this little company that had a big vision, but was still a little company, and it was just the perfect match.
SA Ibrahim: Wow. That is an impressive story, and there must be something in the water in Boston because I had a mentor one time. Dick Rosenberg was the CEO of Bank of America when it was headquartered in California, and he had seen skills in identifying what the customers needed, and how to get the employees to deliver that. But that was essentially what Sig started out with. What have you done since you took over the company along the lines, and how has the company changed in the last few years since you’ve led it?
Jonathan Corr: I think in the last few years it’s really been, and it’s kind of been a strategy that has been the continuation. Even the transition from Sig to me, I don’t think the strategy wasn’t changing because it was my strategy, it was our strategy, it was something that we’ve kind of really had in place since we took the company public, and even a little bit before then. We had transitioned from an on premise software company to a software as a service model. That was a big transition for us as it would be for any company. We had been part way through that as we took the company public, but it really became a model where the momentum around what we were doing, and it was a bit of a simple model. You go out there, you focus on listening to your customers, you build great products, provide great support, provide great services, and it becomes a virtuous cycle. For us, it really has continued on that north star that moves in the sky. The north star is automating everything between the consumer and the end investor. Now, the winds and the tides they change as you’re sailing towards the north star, and so you adapt and you make changes, but you don’t waver from that. Not wavering from that clear vision, holding true to our values in terms of making our customers successful, enabling our people because that’s really the asset you have has continued to be the path. And now the market talks about the digital mortgage, and a couple of years ago everybody talked about compliance. It’s all an evolution. When the industry is worried about compliance, everybody is a compliance company, right? We happen to be the leading company there. When folks are out there looking for a different consumer experience, looking to really drive automation, now it’s the digital mortgage. We kind of like the fashion as really taking it to the next level, and talking about the true digital mortgage, which is not just the upfront process of interest application, which many of these FinTechs are focused on, but truly taking that application, and that grungy manufacturing process, and all the inefficiencies that have driven up the cost in the industry, and really figuring out how to squeeze out time and squeeze out cost for our customers. People talk about the digital mortgage. A digital mortgage is nothing more than the north star we laid out 20 years ago. Automate everything automatable between the consumer and the end investor.
SA Ibrahim: It’s interesting to hear you say that. I remember what had impressed or seem to impress Sig the most was he viewed that you were the author of Encompass. That was your baby. I used to ask people in the industry as I went around, “Who’s doing business with Encompass?” And now I ask them, “Who is not doing business with Encompass?” Can you talk a little bit about what does Encompass deliver to the customers, and why … You have so many happy customers, and is there anybody who’s not using Encompass that you need to conquer?
Jonathan Corr: We still have a few. We’ve gotten to a place where somewhere around 35 to 40% of all the loans in the country run across the Encompass platform. Let’s call that strictly retail. You then also have people that buy loans across the platforms. We’ve come a long way over the last dozen years or so. I think it goes back to the first days when I went off, and I knew nothing about the industry. I didn’t, and that was actually that naivete was a good thing because I went out and I just talked to customers, I talked to prospects, I talked to folks that had other solutions that were out there, like legacy solutions, and began to understand what, at that time, the market needed and that’s what was the seed of defining Encompass. It really went back to building a solution that could reflect the needs and the wants of each of the constituents in the mortgage finance process. The loan officer, the processor, the underwriter, the individual that managed the overall business. Every individual in there has different things that drives their role in the business, and also drives their needs as individuals. When you capture on that and understand that, that’s what drove building the solution. I think that there weren’t a lot of people doing that I also think that when we made the decision to invest the way we did in the early years, and we were scrappy, and we had probably $10 million in revenue at the time, we were investing not on the return that selling the software would get us because we started off servicing the mortgage broker, but really thinking about the bigger picture. If we could automate everything between the consumer and the investor, and we build not only the origination system, but the B2B network, and we think about monetizing and taking out efficiency across the fabric, you can invest a lot more.
SA Ibrahim: Penetration as opposed to coverage.
Jonathan Corr: Yeah.
SA Ibrahim: Or both.
Jonathan Corr: And both. That was the seed of it, and I think we’ve been true to that. Now, we are by far the most comprehensive solution out there. We are focused on our customers, we’ve created a big share, it’s become a very virtuous cycle. We also have a tremendous number of partners across the platform, service providers, investors, Fanny Mae, Freddy Mac that truly benefit from the ecosystem as well, and it becomes reinforcing. As we gain more share, it’s beneficial for more and more of the folks in the ecosystem.
SA Ibrahim: In that way, my impression is, and I’m a huge fan of Ellie Mae and Sig, but I think Sig far exceeded my expectations, and I hope he exceeded his and yours, but now as the industry slows down, and the volume in the industry slows down with rising rates, and maybe we’re entering another slowdown cycle in the housing industry, how do you think Ellie Mae can keep growing? You’ve continued to grow in a very smart way. What happens next?
Jonathan Corr: If you look back over the last, let’s call it, 10 years, we’ve grown at a clip that’s a compound growth rate of well over 30%. All of those years have not been up years. There have been many down years along the way. What we kind of look at is there is a secular shift going on, and that shift is embracing technology, figuring out how to do things more efficiently, figuring out how to deal with margin compression. Independent of loan volume whether it’s a tailwind or it’s a headwind, they just call a neutral market. We think. In terms of continuing to gain share as well as create greater efficiency for our customers, and take cost and time out of the process, we can drive 20%+ growth independent of loan volume. Now, you have a little headwind, maybe it will take a little bit out of it, you get a little tailwind, maybe you get a bit more. The reason we believe that is a couple of things. You look back to 2008. Gross production expands to get a loan done for a consumer by a lender with $3500, and we all know in 2008 it wasn’t efficient. $3500 that should have been well south of $2000. Today it’s over $8000. We’ve got a lot of inefficiency in the system. A lot of individuals bodies that have been put into the back office because people were worried about buybacks or put backs or worried about regulatory. There’s a lot of inefficiency that can be taken out of the system, and that’s really what’s driving our growth. In terms of the overall outlook for the industry, to me, rising interest rates are actually a reflection are positive in that we’ve got an improving economy, interest rates are rising because people feeling better about their situations, better about their income, we have a GPD that’s growing again, and we’re finally to what I consider in residential finance space, a healthy market. Short of we don’t have as much inventory as we would like, but when the market is driven by refinance, it’s a very unhealthy market. That’s a stimulation. People aren’t buying homes. We’re finally to a place where 75%, maybe 80% of originations are going to be driven by home purchase demand. First time home buyers, millennials, demographic. That’s not going to change. That’s going to keep growing. What’s really holding that back from taking off is inventory. Maybe we just go at a steady pace, but if we kind of look into the future right now, if I’m in this industry yeah I’ve got to be smarter about things, I don’t have that extra bit of cushion on re-fi, but I see a very predictable purchase market that’s going to be flat to growing for the foreseeable future. Barring recession, which obviously we may have at some point in the cycle.
SA Ibrahim: And we’ve talked about organic growth that which you’ve been very success, but you also made some strategic acquisitions that have worked out, and not everybody can acquire it to create the companies and leverage them as well as you’ve done, and more recently what led to the acquisition of Velocify, and do you see what has been happening as one of the most used CRMs back to its days as a Leads 360?
Jonathan Corr: Yeah. We’ve known them for years. Yes, acquisitions for us have always been, I’ll call them, quasi-organic growth. We buy small companies that have good products, a good team, a good cultural fit because those are very important to integrate because that’s where most things fail, and that we can sell that product and that service into our base through our distribution channel. Velocify is the latest, but we’ve done it over the years in compliance, in docks, etc. The thing that was attractive about Velocify for us was they were a very successful player in terms of lead management and distribution. CRM. And they are used by a lot of folks that purchase leads because if you’re buying leads, you have to very quickly take that lead and engage it with a loan advisor. If you don’t, you’re going to lose it because those leads are going to other lenders as well. That’s what they honed and done so well. Our thesis, and I think it’s playing out, is that every lender today wants to have some level of online presence. They want to have their version of Rocket Mortgage. It’s all the way from, “That’s how I’m going to do my entire business,” to people that 10%, 20%, 30%, 50%, whatever it may be, no matter what lender you talk to they want to have capability, mobile, tablet, whatever for the consumer to engage and start the process. What do you do when that consumer starts the process? You better get them quickly to the right sales advisor and engage with them through text, telephony, email. That’s what Velocify does. It’s a perfect fit for where the market is going.
SA Ibrahim: That was the close of this session. I congratulate to you on being named top CEO of Glass Door, which is not an easy award to win because it’s based employee feedback, and you’ve continued the tradition that Sig was so passionate about making Ellie Mae retain its status as the best place to work, and you won that award again in 2018.
Jonathan Corr: Yeah.
SA Ibrahim: It must be great to work in a place where everybody feels so appreciated.
Jonathan Corr: I’m a big fan of Patrick Lencioni. He writes the book about organizational health and the advantage, and how a healthy organization is actually a key differentiator, a competitive differentiator, and a lot of people don’t realize that. You could have smart technology people in marketing and sales, but you can create a health organization where everybody knows where you’re going, everybody knows that north star and you communicate it over and over again, and you reinforce it, and you have a set of values, and you walk those values, you talk those values, you share them regularly, and then you enable your people. You treat them well, you treat them fairly, you listen to them. They may not always agree, but when you disagree, you disagree respectfully and you create an environment that works well in that in a software company when you’re delivering to customers. That’s really what it’s all about. That’s what we’ve tried to do year, over year, over year, and it’s paid dividends.
SA Ibrahim: Here’s we’re talking to, what I consider to be, one of the stars in the industries who has been able to bring the intersection of technology and mortgages work. What’s next for you?
Jonathan Corr: I’m having a great time. I never thought I’d be anywhere in the technology business for almost 16 years. It’s unusual here in the valley, but it’s still a great team, I love the organization, I love my team mates, we have such a runway ahead of us, we’ve come so far. We’ve got a bit over 30 shares, but that’s only first third of the game. We’ll do about $500 million in revenue this year. It’s kind of the current guidance, and we’ve set a goal for ourselves over the next four plus years to become a billion dollar revenue company, which is very rare here, and I know this team can do it. I’m very honored and humbled to be the leader and support these folks on their journey there.
SA Ibrahim: Would look forward to coming back and interviewing you then when you hit the billion dollar mark or maybe even sooner.
Jonathan Corr: I’ll look forward to it.
SA Ibrahim: But in the meantime, in terms of where next not necessarily professionally, but in terms of your hobby it has to be on the golf side.
Jonathan Corr: Oh it is on the golf side, and it was great with the Ellie Mae classic. We started doing that a few years ago. It’s a web dotcom event. Part of the entryway to the PGA. By no means do I have that skillset. Even watching Steph Curry out there, the MVP and NBA champion. It’s pretty impressive and pretty exciting, and again we get to combine that with something we also like doing, which is giving back to the community. We’re able to generate a lot of money for charity through that event while having a great time playing the game of golf.
SA Ibrahim: Thank you again Jonathan, and let me tell you I’m going to walk away from this interview so excited and thrilled in what you’ve done, and what you as a person bring in terms of energizing people that I’m going to be on a high for the next few days.
Jonathan Corr: Thank you so much SA. It’s good seeing you.