Parent-tech startups on the rise with VCs after pandemic upheaval

NEA partner Vanessa Larco, pictured with her two children, expects to see funding in parent tech startups continue to rise as female VC investors grow their ranks.
(Shefali Parekh/Courtesy of Vanessa Larco)

Helen Mayer, founder of Otter, a child care marketplace for stay-at-home parents, says that one of the most exciting parts of its funding round earlier this year was meeting Jess Lee, Sequoia's only female partner.

It turned out that Lee, who was hired by the premier firm in 2016 and is a mom herself, had been looking for a child care investment for several years, and Otter's flexible and more affordable solution resonated with her. Sequoia led the startup's $23 million Series A in July.

"I think Jess Lee illustrated the power and potential that comes with having women on the other side of the cap table," Mayer said.

Parent tech, one of the subcategories of family tech, wasn't of much interest to investors until the past few years. But slowly-growing ranks of women in venture capital, together with the numerous challenges of taking care of kids during lockdowns, have shined a spotlight on the need for more tech-enabled offerings for modern parents.

Venture-backed parent-tech companies in the US have attracted nearly $1.4 billion in 2021, according to PitchBook data. That total is larger than what the category garnered in the previous four years combined.

This year alone, several startups have closed significant funding rounds at nine-figure valuations. Among them are companies like Zum, a ridesharing service for kids; the Mom Project, a flexible job-recruiting platform; and Cleo, an app for finding parenting coaches.

"It's a massive market," said Vanessa Larco, an NEA partner who led her firm's Series B in Cleo. "Millennial women work, and they are willing to spend a lot of money on parenting solutions."

The market for child care was estimated at $136 billion in 2019, according to a recent McKinsey report. Spending in the category includes everything from a long list of gadgets for newborns and career planning for new parents to the rapidly rising costs of nannies, day care centers and summer camps.

Alda Dennis, a general partner at Initialized Capital and mother of three, said she's happy that family tech is finally getting more attention, but added that there are still many untapped opportunities that could support parents.

"My life is awash with soccer practices, printing out homework and millions of other little tasks like making sure the tuition is paid on time," said Dennis, who sits on the board of The Mom Project and is evaluating startups that help families organize and schedule child-related responsibilities.

Dennis is also frustrated that her neighborhood in San Francisco has two emergency pet clinics but not a single pediatric urgent care. "I've had my son get sick on a Sunday evening, and I can't even find anyone online to do a virtual visit, but I could just go down the street if I had a dog," she said.

She mentioned that Brave Care, a pediatric healthcare startup that raised a $25 million Series B this fall, aims to tackle the dearth of emergency clinics for kids.

But the most significant burden for families with young children is finding quality and affordability in child care.

The pandemic greatly exacerbated an existing shortage of child care options. Since March 2020, many day care centers have closed permanently, and one out of 10 child care jobs have disappeared, according to a Wall Street Journal report.

"About 50% of American families now live in a child care desert, where there are more than three kids for every day care slot," Mayer said. She conceived the idea for Otter after the day care her twin toddlers attended shut down at the start of the pandemic, precluding her from working full time.

The lack of reliable child care has forced many other mothers to drop out of the job market entirely, contributing to the lowest workforce participation among US women since the 1970s.

Other startups offering tech-enabled child care solutions include Andreessen Horowitz-backed Wonderschool, a platform that helps providers launch in-home day cares and preschools, and Winnie, a child care marketplace.

If approved by Congress, the Biden administration's Build Back Better Act promises to cap child care costs at 7% of families' income and provide free preschool for 6 million children.

"Anything that increases access and gets more money into the hands of families to afford child care is huge," said Sara Mauskopf, Winnie's co-founder and CEO.

More VC funding into the vertical will hopefully follow; a number of women investors are already spending a significant portion of their time on parent tech.

"It's no coincidence that the more women you get in venture, the more of these parenting-tech startups get funded because a lot of parent-related tasks fall on women," said NEA's Larco.

Earlier this year, investors Julie Wroblewski and Joanna Drake launched Magnify VC, a firm focused on family tech that is raising a $50 million fund anchored by Melinda French Gates' Pivotal Ventures.

While venture capitalists are waking up to the opportunities in this area, many of them are still with smaller funds. "What we need is more growth-stage investors for these companies to thrive," Dennis said.

So what is keeping more large funds from getting involved?

"The addressable market in this category is huge," said Dennis, "but there may not be as much attention on it because there are other bright shiny objects in the room, like crypto."

This article originally appeared on PitchBook News