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Apr 9, 2019 · 20m · top-founders

1354 Mortgage Lending Software Passes $2m in ARR, Bootstrapped

Lori Brewer · 10m spoken Nathan Latka · 7m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this interview with Nathan Latka, LBA Ware founder and CEO Lori Brewer explains how she bootstrapped a mortgage lending and commission management software company to $2 million in ARR with zero churn. Brewer shares actionable insights on hybrid SaaS pricing, enterprise sales in a heavily regulated vertical, and navigating macro headwinds through automated compliance.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 38.9% of the talking time here. How this is scored →

Nathan as informed peer 4.5 Guest teaching 2.5 Guest disagreement 1.2 Nathan pushing back 2.0
05100:0010:0020:000:00–2:16 · Nathan as informed peer 0/10 Book Promotion: How to Be a Capitalist Without Any Capital Monologue segment consisting of a book advertisement, show teaser clips, and a brief biographical introduction to Lori Brewer.2:16–4:29 · Nathan as informed peer 3/10 Origin Story: Founding LBA Ware in 2008 Nathan asks foundational questions about the origin of LBA Ware in 2008. Lori explains the post-Dodd-Frank regulatory landscape governing mortgage commissions and compliance requirements.4:29–8:47 · Nathan as informed peer 6/10 Pricing Structure and Monetization Model Nathan quickly runs calculations on average contract value ($40k) and customer count (50) to derive their $2M ARR. Lori details their hybrid monetization model of flat fees plus per-closed-loan charges.8:47–12:18 · Nathan as informed peer 7/10 Enterprise Sales Cycles, Onboarding, and Product Expansion Nathan explores unit economics and argues that having zero customer churn proves the product is underpriced, urging Lori to triple prices. Lori counters with their land-and-expand product roadmap and high initial onboarding costs.12:18–16:00 · Nathan as informed peer 6/10 Calculating Over $2 Billion in Mortgage Commissions Nathan extrapolates total loan volume by calculating backwards from $2B in commissions. Lori educates Nathan on industry trends, explaining how margin pressure and rising rates drive demand for efficiency software.16:00–20:03 · Nathan as informed peer 5/10 Year-Over-Year Growth and Rejecting Acquisition Offers Nathan tests Lori with a hypothetical $10M buyout offer from a strategic competitor like Kabbage. Lori firmly rejects the valuation before transitioning into the Famous Five wrap-up.0:00–2:16 · Guest teaching 0/10 Book Promotion: How to Be a Capitalist Without Any Capital Monologue segment consisting of a book advertisement, show teaser clips, and a brief biographical introduction to Lori Brewer.2:16–4:29 · Guest teaching 3/10 Origin Story: Founding LBA Ware in 2008 Nathan asks foundational questions about the origin of LBA Ware in 2008. Lori explains the post-Dodd-Frank regulatory landscape governing mortgage commissions and compliance requirements.4:29–8:47 · Guest teaching 2/10 Pricing Structure and Monetization Model Nathan quickly runs calculations on average contract value ($40k) and customer count (50) to derive their $2M ARR. Lori details their hybrid monetization model of flat fees plus per-closed-loan charges.8:47–12:18 · Guest teaching 4/10 Enterprise Sales Cycles, Onboarding, and Product Expansion Nathan explores unit economics and argues that having zero customer churn proves the product is underpriced, urging Lori to triple prices. Lori counters with their land-and-expand product roadmap and high initial onboarding costs.12:18–16:00 · Guest teaching 5/10 Calculating Over $2 Billion in Mortgage Commissions Nathan extrapolates total loan volume by calculating backwards from $2B in commissions. Lori educates Nathan on industry trends, explaining how margin pressure and rising rates drive demand for efficiency software.16:00–20:03 · Guest teaching 1/10 Year-Over-Year Growth and Rejecting Acquisition Offers Nathan tests Lori with a hypothetical $10M buyout offer from a strategic competitor like Kabbage. Lori firmly rejects the valuation before transitioning into the Famous Five wrap-up.0:00–2:16 · Guest disagreement 0/10 Book Promotion: How to Be a Capitalist Without Any Capital Monologue segment consisting of a book advertisement, show teaser clips, and a brief biographical introduction to Lori Brewer.2:16–4:29 · Guest disagreement 0/10 Origin Story: Founding LBA Ware in 2008 Nathan asks foundational questions about the origin of LBA Ware in 2008. Lori explains the post-Dodd-Frank regulatory landscape governing mortgage commissions and compliance requirements.4:29–8:47 · Guest disagreement 1/10 Pricing Structure and Monetization Model Nathan quickly runs calculations on average contract value ($40k) and customer count (50) to derive their $2M ARR. Lori details their hybrid monetization model of flat fees plus per-closed-loan charges.8:47–12:18 · Guest disagreement 2/10 Enterprise Sales Cycles, Onboarding, and Product Expansion Nathan explores unit economics and argues that having zero customer churn proves the product is underpriced, urging Lori to triple prices. Lori counters with their land-and-expand product roadmap and high initial onboarding costs.12:18–16:00 · Guest disagreement 1/10 Calculating Over $2 Billion in Mortgage Commissions Nathan extrapolates total loan volume by calculating backwards from $2B in commissions. Lori educates Nathan on industry trends, explaining how margin pressure and rising rates drive demand for efficiency software.16:00–20:03 · Guest disagreement 3/10 Year-Over-Year Growth and Rejecting Acquisition Offers Nathan tests Lori with a hypothetical $10M buyout offer from a strategic competitor like Kabbage. Lori firmly rejects the valuation before transitioning into the Famous Five wrap-up.0:00–2:16 · Nathan pushing back 0/10 Book Promotion: How to Be a Capitalist Without Any Capital Monologue segment consisting of a book advertisement, show teaser clips, and a brief biographical introduction to Lori Brewer.2:16–4:29 · Nathan pushing back 1/10 Origin Story: Founding LBA Ware in 2008 Nathan asks foundational questions about the origin of LBA Ware in 2008. Lori explains the post-Dodd-Frank regulatory landscape governing mortgage commissions and compliance requirements.4:29–8:47 · Nathan pushing back 2/10 Pricing Structure and Monetization Model Nathan quickly runs calculations on average contract value ($40k) and customer count (50) to derive their $2M ARR. Lori details their hybrid monetization model of flat fees plus per-closed-loan charges.8:47–12:18 · Nathan pushing back 5/10 Enterprise Sales Cycles, Onboarding, and Product Expansion Nathan explores unit economics and argues that having zero customer churn proves the product is underpriced, urging Lori to triple prices. Lori counters with their land-and-expand product roadmap and high initial onboarding costs.12:18–16:00 · Nathan pushing back 2/10 Calculating Over $2 Billion in Mortgage Commissions Nathan extrapolates total loan volume by calculating backwards from $2B in commissions. Lori educates Nathan on industry trends, explaining how margin pressure and rising rates drive demand for efficiency software.16:00–20:03 · Nathan pushing back 2/10 Year-Over-Year Growth and Rejecting Acquisition Offers Nathan tests Lori with a hypothetical $10M buyout offer from a strategic competitor like Kabbage. Lori firmly rejects the valuation before transitioning into the Famous Five wrap-up.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 93.1% · guest 6.9%0:00 · Nathan 93.1% · guest 6.9%3:00 · Nathan 29% · guest 71%3:00 · Nathan 29% · guest 71%6:00 · Nathan 30.8% · guest 69.2%6:00 · Nathan 30.8% · guest 69.2%9:00 · Nathan 17.1% · guest 82.9%9:00 · Nathan 17.1% · guest 82.9%12:00 · Nathan 35.5% · guest 64.5%12:00 · Nathan 35.5% · guest 64.5%15:00 · Nathan 24.7% · guest 75.3%15:00 · Nathan 24.7% · guest 75.3%18:00 · Nathan 39.1% · guest 60.9%18:00 · Nathan 39.1% · guest 60.9%
Sharpest disagreement ▶ 17:35 Instant rejection of 5x ARR buyout

Lori immediately shuts down Nathan's hypothetical $10 million acquisition offer from Kabbage, asserting that the business has far more standalone value.

 Hardest push from Nathan ▶ 11:25 Push to triple price points on zero churn

Nathan pushes back against Lori's pricing strategy, insisting that having zero churn is proof that she is undercharging and should triple contract prices.

 Biggest teaching moment ▶ 14:31 Downturn dynamics increasing tech adoption

Lori explains to Nathan that counterintuitively, margin compression and mortgage industry headwinds drive lenders to adopt her software to cut operational costs.

 Nathan holds their own ▶ 13:31 Extrapolating $100B total volume from commission data

Nathan demonstrates financial mastery by calculating that $2B in calculated commissions at a 3% rate implies nearly $100 billion in total loan volume processed.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Book Promotion: How to Be a Capitalist Without Any Capital 0000 Monologue segment consisting of a book advertisement, show teaser clips, and a brief biographical introduction to Lori Brewer.
Origin Story: Founding LBA Ware in 2008 3301 Nathan asks foundational questions about the origin of LBA Ware in 2008. Lori explains the post-Dodd-Frank regulatory landscape governing mortgage commissions and compliance requirements.
Pricing Structure and Monetization Model 6212 Nathan quickly runs calculations on average contract value ($40k) and customer count (50) to derive their $2M ARR. Lori details their hybrid monetization model of flat fees plus per-closed-loan charges.
Enterprise Sales Cycles, Onboarding, and Product Expansion 7425 Nathan explores unit economics and argues that having zero customer churn proves the product is underpriced, urging Lori to triple prices. Lori counters with their land-and-expand product roadmap and high initial onboarding costs.
Calculating Over $2 Billion in Mortgage Commissions 6512 Nathan extrapolates total loan volume by calculating backwards from $2B in commissions. Lori educates Nathan on industry trends, explaining how margin pressure and rising rates drive demand for efficiency software.
Year-Over-Year Growth and Rejecting Acquisition Offers 5132 Nathan tests Lori with a hypothetical $10M buyout offer from a strategic competitor like Kabbage. Lori firmly rejects the valuation before transitioning into the Famous Five wrap-up.

Statements from this episode (15)

Assertion Supported
Dodd-Frank prohibits mortgage loan commissions based on product revenue
“After 2008 and nine, there are laws within Dodd-Frank that they can only pay in certain ways. They can't pay on the revenue of the product, but they can pay on the production of the product.”
Lori Brewer Apr 9, 2019 ▶ 3:46
Disclosure
LBA Ware annual contracts average around $40,000
“In general we're selling annual contracts and general annual revenue, our general price point is about 40 K.”
Lori Brewer Apr 9, 2019 ▶ 4:38
Disclosure
LBA Ware usage fees range from $3 to $10 per funded loan
“Per loan fee, we're very cheap on average. Again, depending on the size of the lender, but between three up to 10 dollars a loan.”
Lori Brewer Apr 9, 2019 ▶ 6:02
Disclosure
LBA Ware is cash-flow positive and will not raise venture capital
“So we're not planning to take money, you know, at this point because we've, we are cashflow positive and you know, plan to increase, increase that.”
Lori Brewer Apr 9, 2019 ▶ 7:07
Assertion Not checkable as stated
LBA Ware has surpassed 50 enterprise mortgage lender clients
“So we did surpass the milestone. We're over 50 lenders and those lenders represent sizes of, you know, within a lender, it's an enterprise fast sale.”
Lori Brewer Apr 9, 2019 ▶ 7:50
Assertion Not checkable as stated
LBA Ware targets a TAM of around 5,000 mortgage lenders
“There are really only, you know, let's call it 5000 companies out there that we could potentially sell to.”
Lori Brewer Apr 9, 2019 ▶ 8:59
Assertion Not checkable as stated
LBA Ware spends $20,000 to $25,000 to acquire a new lender
“So probably in the neighborhood of 20, 25.”
Lori Brewer Apr 9, 2019 ▶ 9:52
Assertion Not checkable as stated
LBA Ware has zero churn and zero failed implementations
“Our best stat, Nathan, is we've never lost a client and we've never had a failed implementation.”
Lori Brewer Apr 9, 2019 ▶ 10:39
Assertion Not checkable as stated
LBA Ware takes over a year to break even on new clients
“The first year we're not making any money on that client because of resources that we extend for, you know, customization, ensuring that we migrate all their plans. It's, So yeah, I would say it's at least a year before we're making money.”
Lori Brewer Apr 9, 2019 ▶ 11:05
Insight
Latka: Zero churn means your SaaS software is severely underpriced
“If you have zero churn, you know what that means, right? ... It's too cheap. Triple your price points.”
Nathan Latka Apr 9, 2019 ▶ 11:26
Assertion Not checkable as stated
LBA Ware has processed over $2 billion in lifetime mortgage commissions
“The piece we're dealing with are those commissions and over the lifetime of the product where we have t-shirts now they have three commas because we exceeded a billion dollars in the commissions that we calculated. And we just this month went over two billion.”
Lori Brewer Apr 9, 2019 ▶ 13:14
Prediction Didn’t hold up
Brewer predicts 2019 will be a hotbed for mortgage industry M&A
“This year is, is going to be a hotbed of merger and acquisition activity.”
Lori Brewer Apr 9, 2019 ▶ 14:31
Assertion Supported
MBA report: Mortgage lenders are losing money on the average loan
“The Mortgage Bankers Association last quarter Released a report that said on average lenders were losing money on every loan, on average”
Lori Brewer Apr 9, 2019 ▶ 14:50
Assertion Not checkable as stated
LBA Ware grew from $1.5M ARR to $2M ARR over 12 months
“Like one point a year ago, we were about 1.6, I believe, 1.5.”
Lori Brewer Apr 9, 2019 ▶ 16:08
Disclosure
Brewer would reject a $10M buyout offer for LBA Ware
“No. ... I think we have far more value than that.”
Lori Brewer Apr 9, 2019 ▶ 17:43
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