Daniel Eberhard, KOHO - Founder Journey Series, Episode 2

3, 2, 1.

Hey everyone, welcome. Today's episode of Founder Journeys. These entrepreneurs and these founders that are joining us are people that I really look up to and admire and I'm excited to get in contact with today. Dan Eberhard, CEO, founder of Koho, which is Canada's number one leading challenger bank. Tell us about Koho, the industry and just a little bit about yourself to get things rolling here.

So at Coho, we're trying to do two things. How do we give everybody a great financial foundation and how do we democratize access to the best financial products? During university, I co founded a wind energy company and we ended up getting lucky and ended up selling that company. And for the first time I had a little bit of money.

Take a step back. That was in university. While you were still in university, you built a company and exited.

Yeah, it was part of my university project, I should say. Like I was the co founder, I was still in university. My friend who was the CEO who had graduated a year prior to me, we started the company together. I had looked at my mom's kind of investment portfolio as I was getting more and more educated in this space. I grew up to a single mom who did a lot of menial jobs to give us like a middle class lifestyle in Canada. And I think my perspective is if you have a middle class life downtown, you've kind of won the lottery. And when I looked at like how hard she worked and then I looked at her investment portfolio where 40, 50% of her retirement was going to be corroded just because she was in bad financial products which frankly are very standard and average in Canada. There was just such a disconnect for me between how hard she had worked and just like the completely rent seeking behavior of the financial products that she was in. And so that kind of put me on this journey.

And that's actually a pretty common story. This is not just one off, this is. A lot of people are faced with this and not just in Canada. It's a global issue.

And that was kind of part of it, is coming to terms with the fact that this was symptomatic and it might not be too strong a way to say by design in the Canadian system. And like a more acute example is if you have less than $5,000 and you bank with any of the big six institutions in Canada, which is 95% of Canadians, they pay you 0.0, 1.05% on a savings account and then they turn around and make 2.5, 2.8% on what's called their net interest margin. So if you're going to price out 2/3 of the comp of the Canadian population and then turn around and make somewhere between 50 and 200 times more on their money than they are and you're going to protect the oligopoly that does, so then that feels a lot like a poor tax. And so that's kind of where Coho comes from is how do we again democratize access to the best financial products and give everyone a great financial foundation. And so it's predicated on a no fee account. It gives you real time cash back and that automates a lot of the ways that you save. So it's just a much more elegant kind of banking experience. We're not a bank, we don't take deposits. We've partnered with an institution that does that because nobody wants a flaky startup like holding their money.

Flaky startup, maybe when you started, but you guys are global. I'm seeing ads on tv that's kind of when you know you made it. Where I'm watching Hockey night in Canada, see Coho ads.

I don't know if you ever feel like you made it but you know, fast forward to today. We're about 130 people will wrap around fairly soon, so that'll bring kind of capital raise to 130 million or so. And so, you know, it's amazing to be here now, but still feels like we got, we got a really long way to go and certainly haven't made it.

What are some of the obstacles that you've had to overcome that made you who you are today?

First of all, I think that not nearly enough entrepreneurs give enough credit to just luck in every ver, you know, and the simple way to think about it is like the person who builds a billion dollar company is not a thousand times smarter than the person who builds a million dollar company. Like it just doesn't work that way. Anybody who doesn't pay a lot of respect to that luck is missing the point a little bit. So we started selling private wind turbines that were like $100,000 to farmers. And so I cut my teeth like hosting town halls in towns in Saskatchewan with 85 people, 22, 23 years old and trying to get these like farmers to buy wind turbine from us and just kind of getting laughed out of the room basically. We eventually like sold a couple which got us to a place where we're eventually able to compete for like industrial scale wind farm development. Being in this position where all these, all these large Industries were kind of laughing at us at the beginning and 10 or 15 months later we had eight of them trying to buy us. Now that's like the glory story. What you don't hear in that journey is like, you know, me and, me and the guy who started that business, we don't really speak anymore. And this is the first time I've ever talked about that publicly. And I think that there was a lot of like pain and a lot for both of us, I'm sure, and kind of coming to terms with what ultimately started out to be like one of my best friends and, you know, it got real. That's like a really complicated thing to figure out, especially when it feels like, and looks like on the outside a great story.

You hear this all the time, like, don't do business with friends and family. It's always never a good outcome. But as entrepreneurs, you kind of ignore that. But just trying to make it work.

It's one thing if you lose the friendship and that sucks, it's another thing because your family's money is in that business. And so generally that means it doesn't work out if the friendship implodes. When it works, it works beautifully, but it's certainly a high risk way to approach it.

You have to put in the work. There is different dynamics and people change and evolve over time as well. So let's fast forward to Koho and the journey there. This obviously has not been a great easy path, but it's starting to become somewhat fruitful.

I think it's been really hard. I mean, I think it's always really hard. I would have known that five and a half years ago, I'd be here now with this kind of capital raised. And in my head I would have looked at that and said, wow, that must be an incredible success. And for sure things are going well, but it still feels like we have so much to do and the business still feels like we have like so much we can get better at. And I remember looking at people when I just started and looking at people who had raised, you know, $20 million, like, whoa, like that is crazy. They must really have a pain. And now we've raised like six times more than that and we still feel like we've got so far to go. You know, I think that's one thing.

That a lot of entrepreneurs or first time entrepreneurs don't realize is that it is so glorified in today's world. Like you raise a round, like, that's amazing. It's great. It's like, okay, well, what did you actually do? You convinced somebody to give you money to execute on a plan. Now you have to execute on that plan and give them that return. And so this is just the beginning of the challenges that you're faced with, because you have to deliver.

I have a friend, and he put it really well, and most entrepreneurs who are good at it. So in this very specific example, he. He was a guy who had a lot of stress and a lot of anxiety and just kind of operated in a way with a lot of neuroticism. And then he went and started a business and then everyone was like, oh, of course you operate that way. You're. You're like an entrepreneur and founder. And he's like, but from his perspective, it was just a socially acceptable way to be a neurotic individual. Like, he was always wired that way.

So. So building a startup, having a family, and managing relationships, where do you see that in terms of work life balance?

Work life balance for me means that I have the support of my partner to be really, to be really impactful in my business. But, like, my definition of success hopefully goes beyond just Coho doing well. The way that it's been put eloquently before is like, I want a full heart, a clear mind and a fit body. I think work life balance is the precursor to that is self awareness. And I'm a big believer in investing in self awareness, which is like coaching and therapy and all of those kind of. There's like really important parts of the toolkit because I think a lot of work life balances actually just miscontrued, like a lack of self awareness. Because if you want to work like 90 hours a week and that's where you want to be, then that's a wonderful thing to do. And if you want to work 35 hours a week and that's where you want to be, then that's a wonderful thing to do. But if you're not even clear on what your kind of foundation is, I think that's a. That's the. That alignment is a big energy tax.

How is that permeated through the business and your team and the culture that you have?

Yeah, because Koho is a great company.

And I know people that work there and they love it. The culture that you guys have going on and the impact that you're having across Canada, especially for younger generation, you guys are an amazing solution.

Thank you. I appreciate that. I think there's a couple things that give Coho an advantage in some things that we've done well so, so we've always had coaching at Koho from, from our earliest days initially we had that as a contractor which was just a resource that's made available and around 40, we made that 40 people, we made that coach in house. We've just hired our second coach and, and coaching makes so much sense for startups that like first of all the vast majority of managers in a startup are new managers, right? So they don't know how to do it. People don't know how to give feedback up or down. Like it's a hard thing to get those things right. And so having a coach who can kind of facilitate that almost acts like a lubricant your company to just like have all those conversations. I think if you can just help again with self awareness, it feels like the right thing to do. From a company perspective. Is this coach going to make the other 40 people 2 1/2% more impactful? And if it is, then it's like a positive ROI investment and I think it's probably much closer to 5 or 10% once you figure in retention and all that kind of stuff. We're like a pretty values driven organization. My own thesis on Koho is like, I think the value of the product is real and I think there's real tangible benefit to people who use it. So you feel good about it. Like there's a mission component to it.

One of the things I even struggle with is as a founder, what is the difference between a mentor, an advisor and a coach? Like are they interchangeable or are there specific functions for each? Yeah, and then you add investor into that mix as well.

We can take a lot of time but hopefully like an investor is somebody that you can be honest with. But, but let's not forget that they have a fiduciary obligation. And I have a really candid relationship with my investors and I, you know, give them feedback and they give me lots of feedback.

We always talk about getting a smart, smart money, right? So these investors, you want them engaged, you want them giving feedback and it's a very different role than a coach.

Because the coach is your employee or your, however that relationship happens to be. You know, I think that the coach is probably the purest sense of like the process. And the other thing that's really important about coaching or therapy, you have an hour every week where you're just going to stop and check in and be like, how am I doing? My partner and I do therapy. We always have what levers in it. And it took our therapist to say and this was just this week. But hey, you guys just moved across the country, you have a five month old, you're currently undergoing a fundraise during a pandemic. It's probably okay. That shit's a little stressful right now.

So someone actually helping you verbalize, so you internalize a lot of stuff. You might think about it, but you don't actually bring it out and talk about it.

That's exactly right. And how often are you kind of somewhat stressed out, but you just don't pick up the phone or you don't talk to anybody. But the forcing function which requires that you be really present for an hour is pretty hard to replace. I think it just adds a different.

Element with the audience that's listening. I myself have worked with entrepreneurs from the ideation stage to seed to series a to even IPO. Through traction. We see CEOs of some billion dollar companies that come through our network. When is the right time to look at getting a coaching look at getting some third party dialogue going? Because entrepreneurship is a very lonely world. Being a founder is a very lonely world. And not just when you're just starting out. Even CEOs of billion dollar companies have challenges. And when we talk about coaches, I know a lot of these successful CEOs, they don't have coaches, but others do. So when is a right time to try to bring in some expert help?

Like today. And everybody has their different ways of doing this. So certainly, you know, coaching works for me. Even the coach at Koho, I don't, I don't really work with her. I have like a series of. Mostly today I lean on mentors and advisors. But for a while I spent I think once a week for two years. I met with just a philosopher and like that was a stage I kind of went through. Given how much of the business relies on the energy and the direction and the focus of the CEO. It's unusual to me that more people don't do it.

We live in a world where things are changing every single day. Like you start with COVID then you got Black Lives Matter and now there's elections happening that are going to change the dynamics of. Let's just face it, it's not just the us. The US election will have an impact around the world. And on a selfish note here, I'll also say that one of the other vehicles that you can leverage for the self awareness and support is joining an incubator accelerator. I always say some of the best mentorship and advice that you get is from a fellow entrepreneur. Or somebody that just went through the same things.

Really caring about your mission pulls you towards a better outcome. Really like surrounding yourself with people who are working harder than you pulls you towards a better outcome. And there's a reason that athletes have coaches, there's a reason that Michael Phelps has a coach. It's clearly not about raw ability as much as it is like deliberate applied energy. I think being in a community is such an important part of, of understanding and accelerating your own kind of trajectory.

You're an awesome entrepreneur. You're an awesome human being.

Thank you.

Anything that you want to talk about and any specific topics that we haven't touched on yet.

There's like raise VC or non raise vc like all things being equal, I don't think raise vc but there's a very kind of individualistic component to that. But we're building a very capital intensive business and I can't bootstrap a bank, you know what I mean? And so our mind was made up from the jump. Like VC is overrated and there's, there's so many new asset classes, you know, that are forming around this. Whether that's like, you know, debt, like there's better access to debt. There's like what the folks at Metalab are doing with like buying Internet businesses which are growing 20 or 30% a year. The other thing that is changing in the VC dynamic is secondary is becoming way more common in vehicles. And so this is like one, one thing that's been positive in VC is like you used to be as an entrepreneur that you would have 99% of your network wrapped up in your company. But, but the good VCs are now way more secondary. They have way more appetite for secondary and want you to see the individuals and the teams be de risk so that they can go for the 10, 10, 20, 30, 40x.

Any, anybody listening that might not know what a secondary is? Secondary is essentially an opportunity for the, the founders or the shareholders of the company to sell off some of their equity for a profit of themselves.

Right. And you like, you have to be in a fortunate position where you have more capital than is willing to come into your, than you're willing to take on. But at Coho we've already done one secondary where the whole company was able to participate. So you know, there's more and more markets for people who work in these companies to get access to debt.

And the smart VCs are realizing that that creates a more solid team, that they're able to see some liquidity. And the ones that we're going to leave, are going leave. But the other ones that are happy and are enjoying it are going to stay and they're going to be that much more productive because they don't have to worry about paying their bills.

Right? For sure. But it's super disingenuous of VCs to take a portfolio approach but then also ask their entrepreneurs not to have a portfolio or to de risk themselves. Their incentive structure only makes sense if they're going to have one or two or three things that are going to turn 30 or 40x so they don't want any businesses to double. Like they don't give a shit. It doesn't move the needle so. And it frees up and actually better aligns the VCs and the operators. There is secondary so. So that is becoming more common. So it isn't becoming as binary. The only other thing I'd add on, on this and whenever people talk about should I boost trap or take capital, there's lots of gray area in between where I think people like if somebody owns 5 or 10% of your company, it doesn't really matter from an operator's perspective. Like they'd have some information rights and stuff like that. It's not until you get into board structures or majority ownership or these kinds of things that you really kind of change the operational dynamic of your company. There's lots of room between bootstrapping and VC where you give up 10 or 20% of your company, still retain full autonomy and also de risk yourself a little bit in that process potentially, you know, and so it's great. And the folks at Clearbank are giving other options on financing your company too. So there's just like there's like options and way better options for growing companies than there historically was. We're back.

But one of the other things that we've had a number of founders talk about is the negative connotation around just building a lifestyle based business. And I hate that name. I wish there's a new name for this. But lifestyle business doesn't necessarily mean it's a small mom and pop grocery store or a dry cleaner. You see, companies are pulling in 10, 20, $50 million in revenue. And for the founders and the team, they're laughing it up because they in essence sometimes are making 5x, even 10x what a VC backed CEO will. Because there's lots of other things that come into play when you start bringing in VC money that a lot of people don't realize or recognize right off the bat. But if you're able to bootstrap and retain your equity. Why not?

I think you're exactly right. And I think if you bootstrap a company to 100k, 200k, half a million, and that business grows at like 30% a year, like in a handful of years, you've got a fantastic life, you know, with no boss and complete autonomy. And I don't think, I think people don't intuitively do the compounding work on some of that stuff.

Yeah, and this is some of the great work that's being done by Clearbank is also empowering some of these side hustles or these digital commerce businesses and realizing that they've been really hamstrung with old archaic business processes and they can come in with new solutions and just free them. This is similar to Coho, again, old structured banking platforms. I remember when we were first talking about what you were planning and looking at a young individual being able to budget and plan their salary and allocate. Those are tools that we've seen in and out every single day with the tech world. Why is it so hard to see it in the banking world for your personal finances and you solve that. Like, that's awesome.

We started the year with two financial products. We had a Coho product and a Coho premium product. By the end of the year we'll have five financial products. One of them is like a hydro savings account, which is not a separate account, it's just one account use cohort direct deposit. You get 1.2% on it, which is not the best in the market, but it's, it's certainly great for a place that your paycheck lands. You don't have to go like the checking account, the savings account. Our early payroll product just gets you paid part of your paycheck early for free, which is like a great lever. And then we have like our credit building product, which for those accountants that have poor credit, it's just like three times cheaper than anything else on the market. You know, this thing is like building credit for Canadians at 9%, which is half the rate of like a credit card. It's so crazy to me that there's like nothing in the middle because the majority of Canadians are in the middle. And so, you know, while budgeting and that stuff is all part of the product and it's baseline. Like some of the stuff we're doing now and some of the stuff that we're going to do over the next 12 months, like I think it's just not even going to be Close how much better we are.

No, hey, you're an entrepreneur. You got to keep, keep hustling and keep plugging. Right? Definitely appreciate the time that you're taking with our audience today. What is one tool or one app that you as a founder can't live without?

The one that comes to mind is Roam Roam Research. It's a note taking app. The way that we historically take notes does not map to how we think. And this is designed to map to how we think. So that lets you go both, like vertical in your thoughts and also horizontal, which makes no sense now, but will when you.

Yeah, so, so it's a web app, desktop app, not on your phone, but while you're typing away at your Mac or your PC. Any piece of advice that you want to leave with our audience.

What one thing can you do to make everything else either easier or unnecessary? I still see way too many people who are like, smart and capable and so clearly working on incremental problems which don't matter. My push to people is always to do the work that lets you deeply, deeply resonate with what you're doing. Not only because it makes everything else easier. Um, but when I, like, when I approached Coho, I, my hedge was not like, like, this was going to be hard. Is it going to be successful? Is it not? I don't know. But the hedge was like, at least it's like a worthwhile thing to spend my time on. Right. So much as an entrepreneur is out of your control that the hedge you have is like, do you feel good about the time that you've spent? And there's one kind of like, filter that I pass this through and it's called like the anonymity heuristic. And the notion is like, if you are anonymous and you can never tell people that you talked about your work, you can never talk to people about what you did, would you, would that change how you thought about your job? A lot of people want to be perceived as an entrepreneur, but they don't actually. That's just because they want to look like an entrepreneur, don't actually want to give a shit about the problem. And like, I used to think that I wanted to climb Mount Everest, and then I put it through that filter and I was like, I don't really want to climb Mount Everest. I want to tell people that I climb Mount Everest. And like, that's a really important thing to know before I start climbing Mount Everest. You know what I mean? If the notion of doing what you're doing anonymously changes how you relate to your work, then it tells you something about where your motivation is coming from.

Having a little connectivity issue. So we're going to go back and forth, but we're sorry, we're going to jump back to our last question. You've given so much to our audience, so much valuable advice. What can our audience do for you?

You know, my push would just be to keep building your companies. It probably won't end up being the company you started with, but it's worth it to keep building your companies. If you like Koho, if you're interested, go check it out. Hopefully it works for you. If it doesn't, that's cool too. But that's my soft Koho plug.

That's Koho Ca, Koho Ca.

I'm on Twitter @DaneBz, D A N E D S or LinkedIn and all that kind of stuff.

You are an awesome entrepreneur, founder, building a great company that's actually having a major impact in our society. So appreciate you taking the time to talk about this with us today. Thanks, Dan.

Thank you.

Thanks, everyone.