Over the weekend, media and digital brand holding company IAC announced that it had agreed to buy Care.com, which describes itself as “the world’s largest online family care platform,” in a deal valued at about $500 million. Despite being the best-known marketplace in the United States for finding child and senior caregivers, Care.com has spent the past nine months dealing with the fallout from a Wall Street Journal investigative article that detailed potentially dangerous gaps in its vetting process. The company’s issues not only highlight the problems with scaling a marketplace created to find caregivers for the most vulnerable members of society, but also the United States’ childcare crisis.
Childcare in the United States is weighed down with many issues and arguably no one platform can fix it, no matter how large or well-known. Over the past year and a half, however, several startups dedicated to fixing specific challenges have raised funding, including Wonderschool, Kinside and Winnie.
IAC and Care.com’s announcement came at the end of a year when more media attention has been paid to the difficulties American parents face in finding and affording childcare, and how that contributes to gender disparities, falling birthrates and other social issues. The U.S. is the only industrialized nation in the world without mandated paid parental leave and childcare is one of the biggest expenses for families. Several Democratic presidential candidates, including Elizabeth Warren and Bernie Sanders, have made universal childcare part of their platform and business leaders like Alexis Ohanian are using their clout to advocate for better family leave policies.
But the issue has already created deep structural problems. From an economic perspective, a September 2018 study by ReadyNation and Council for a Strong America estimated that annually, the 11 million working parents in the United States lose a total of $37 billion in earnings because they lack adequate childcare. Businesses in turn lose a total of $13 billion a year as a result, while the impact on lower income and sales tax reduces tax revenues by $7 billion. Many parents change their career trajectories after they have children, even if they did not plan to. For example, a study published earlier this year in the Proceedings of the National Academy of Sciences found that 43% of women and 23% of men in STEM change fields, switch to part-time work or leave the workforce.
For many families, Care.com, which was founded in 2006 and now operates in twenty countries, is the default resource for finding carers because of its size. The company says more than 14.6 million caregivers have joined its platform and in the third quarter of 2019, it served about 374,000 paying families.
Care.com’s stock jumped after the news of its acquisition broke, but its share price has not recovered from the pummeling it took after the Wall Street Journal investigative report, published in March, about shortfalls in its vetting process. In August, founder and chief executive officer Shelia Lirio Marcelo announced she would resign. A few weeks later, activist shareholder Engine Capital called on Care.com to find a buyer.
In an interview with CNBC, IAC chief executive officer Joey Levin said it acquired Care.com because family care in the United States represents a $300 billion market. IAC is known for scaling marketplaces in verticals including dating, travel and home services and Levin said it plans to invest in making Care.com a more on-demand and “transactional” platform that will make it easier for families to find child and senior caregivers.
The new wave of childcare startups
The deal was the kicker on a big year for the tech companies that focus on childcare. Startups that have recently received funding take different approaches, but a common theme emerges: each are offering a more targeted experience, serving parents and providers in specific areas, or addressing structural challenges like employment benefits and the sustainability of caregiving as a career, when low wages force many providers to leave the field. Here is a look at several of the startups that have raised venture funding over the past 18 months.
Winnie is among several startups helping families find early childhood care more easily. Founded in 2016 by CEO Sara Mauskopf and chief product officer Anne Halsall, the company announced in October that it has raised a $9 million Series A led by Rethink Impact, bringing its total funding so far to $15.5 million. Winnie was originally created as an online community and information resource for new parents, but its founders began focusing on childcare after seeing the challenges many users faced while looking for affordable nearby daycares and preschools, coupled with the fact that many providers don’t have websites or social media profiles. Mauskopf told Crunchbase that Winnie uses “deep data integrations with local licensing authorities” to update licensing information about providers and alert parents about citations or ongoing investigations.
Over the past year, it has grown from 500 cities to 7,000, and now includes about 150,000 daycares or preschools. The startup says the platform has reached more than four million parents. Instead of monetizing with premium memberships for parents, providers can pay a monthly fee that increases their visibility in ads and searches. According to Business Insider, Winnie’s team will use its funding to create more business management tools for childcare centers.
Several startups are addressing shortages in affordable childcare by helping providers launch their own businesses. Wonderschool was started after one of its co-founders, chief technology officer Arrel Gray had trouble finding a good daycare near his home. Gray and Wonderschool co-founder and CEO Chris Bennett, who previously launched e-commerce company Soldsie, realized one reason for the shortage of providers is that may early childhood providers leave the field because they need a higher income, especially if they have children of their own. Wonderschool was created to help them licensed educators and caregivers launch their own in-home preschools or daycares by guiding them through the process of getting credentials, setting up their programs, finding families and managing enrollment and payments.
The startup, which currently operates in New York, California, Colorado and Texas, announced in August 2018 that it had raised a $20 million Series A led by Andreessen Horowitz. Providers on Wonderschool’s platform are licensed by the state they are in and in an interview with TechCrunch about that funding, Bennett said other safety measures include weekly check-ins with directors and regular communication with parents for feedback.
Another startup helping providers launch their own programs is NeighborSchools, which announced $3.5 million in seed funding led by Accomplice last month. NeighborSchools co-founder Bridget Garsh told Crunchbase that the Boston-based company “work[s] with each caregiver to guide them through the state licensing process, business setup, home setup, marketing and on-going operations.” The in-home daycares that they help set up are meant to provide a more affordable alternative to corporate daycare chains, while also helping carers make a better wage. NeighborSchools currently operates in Massachusetts.
Based in Bozeman, Montana and founded by Erica Mackey and Elizabeth Szymanski after they had trouble finding childcare, MyVillage received $5.95 million in seed funding earlier this year to help establish in-home daycares in Colorado, Montana and other states. Like Wonderschool and NeighborSchools, it provides software tools that help carers start and manage their businesses and gives them access to curriculum materials through a partnership with the Center for the Developing Child at Harvard.
One of the main challenges facing childcare provides is the lack of digital tools that help them manage their businesses. Kangarootime describes itself as “the first modern operating system for childcare centers, schools and behavioral health centers.” The startup announced in October that it had raised a $3.5 million Series A led by Cultivation Capital and will launch its software in 2020. It includes features that help providers communicate more closely with families, schedule workers and connect check-in and check-outs with secure door lock software, manage tuition collection and keep their credentials updated.
Kinside works with employers that want to offer family care benefits to employees. Its app launched to the public earlier this month, with a total of $4 million in funding from investors including Initialized Capital. Founded in 2018, the company began by streamlining the complicated process of managin dependent care flexible spending accounts. While in private beta, it also built a network of early childcare providers, who range from home-based daycare centers to preschool chains. Kinside pre-screens caregivers and negotiates reserved spots and discounted rates for users. As of the beginning of 2020, it will serve 1,000 employers.
While companies like Hilton, Cisco, HubSpot and Comcast have gained attention for packages that include paid parental leave or subsidized childcare, it is more challenging for smaller employers to offer these benefits, and that impacts their ability to recruit and retain talent. One of Kinside’s value propositions is that it enables small- to medium-sized businesses to offer stronger family policies; co-founder Shadiah Sigala says the company sees itself as part of the “benefits equity movement,” making sure all workers have access to better policies and benefits.
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